United States, after regulatory easing, a new round of mergers among regional banks is emerging. In the past week, BB & T’s announced acquisition of Atlanta (Georgia) based SunTrust Banks was the first big bang on its way to long-awaited consolidation. BB & T, based in Winston-Salem, North Carolina, is paying $ 28 billion in a stock swap for SunTrust. Thus, the two Southern Institutes join together to form the new number six in the industry. It is the biggest banking merger since the financial crisis.
The two institutions plan to rename themselves and relocate their headquarters to Charlotte, North Carolina, where Bank of America, the United States’ second-largest credit institution, is headquartered. Charlotte is already the most important financial center of the southern states.
Until the financial crisis there was also the headquarters of the Bank Wachovia, but in the wake of the crisis it was taken over by the based in San Francisco Wells Fargo. Wells Fargo is now number three in the industry ahead of Citigroup after JP Morgan Chase and Bank of America. The country’s fifth largest bank is the large US Bancorp regional institute with a strong presence in the Midwest.
The proposed merger of BB & T and SunTrust follows a series of smaller mergers in the industry. This was facilitated by the legislative easing of banking regulation adopted last May by the Republican Congressional majority. Since then, analysts had expected accelerated consolidation. BB & T and SunTrust Banks have been on the list of merger candidates for quite some time, as have Fifth Third Bancorp of Cincinnati or the California CIT Group.
Following regulatory easing, banks will only have to scrutinize more than $ 250 billion of total central bank control, including regular stress tests. The Dodd-Frank bill passed in 2010 under the impact of the financial crisis by a Democratic congressional majority had set the threshold at a significantly lower $ 50 billion. Smaller banks criticized the conditions as too restrictive and expensive.
BB & T and SunTrust are well above the new threshold with a combined balance sheet of around $ 440 billion. The reason for the merger lies in the potential for cost savings as the business environment for banks worsens amid low interest rates and potentially weaker economic growth. Banks must also invest more in digitization.