BB&T, SunTrust Announce Merger To Create Sixth-Largest US Bank

BB&T Corporation BBT reached an agreement with SunTrust Banks, Inc. STI that will see the two regional banks merge into one and become the sixth-largest U.S. bank.

What Happened

The merger of equals will result in a new bank entity that will have around $442 billion in assets, $301 billion in loans, and $324 million in deposits and serve more than 10 million househoulds in the U.S., the companies said in a press release. The rationale behind the combination is to generate better scale, realize $1.6 billion in annual net cost synergies by 2022, achieve industry-leading financial and operating metrics, among other benefits.

Why It's Important

Multiple macro factors, including tax overhaul and deregulation in the financial system made it possible for BB&T and SunTrust to merge, said Brian Levitt, senior investment strategist at OppenheimerFunds. As such, merger between two smaller banks at this time shouldn't come as a surprise to generate synergies and better compete with the "handful of banks that control most of the deposits."

What's Next

Gerard Cassidy of RBC Capital Markets said on CNBC's "Squawk Box" the combination of BB&T with SunTrust could close with minimal tangible book value dilution and earnings accretion. As such, similar regional banks with assets of more than $100 billion will likely be exploring a similar move as the synergy savings are quite notable and only possible through a merger.

SunTurst' stock was up 11 percent at time of publication, while BB&T's stock was up about 5.6 percent.

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