BB&T and SunTrust agree to combine in US$66 billion merger

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Ernst & Young expects a flurry of transactions this year, fueled by easing regulations and the US tax overhaul, which helped lenders build a war chest to spend on acquiring new clients and technology, the financial advisory firm said in a report last month. The combined company will retain operations in Winston-Salem, North Carolina, and Atlanta, Georgia, the home markets for both companies. King said during a call with analysts Thursday that the combined business will invest heavily in technology.

The two midsize banks operating in the fast-growing Southeastern United States described the move as a merger of equals that would enable them to compete against heavyweights like Bank of America and Wells Fargo and save some $1.6 billion in administrative costs. The new bank, which would have its headquarters in Charlotte, N.C., will be the sixth-largest in the USA based on assets and deposits. Until then, Rogers will serve as president and chief operating officer. They said that when they combine, they'll have top-three market share in eight states.

The deal comes at a time when the Trump administration is pushing for easing crisis-era regulations which restricted expansion and added increased regulatory scrutiny on big banks.

In the few hours since the deal was announced, both banks have been calling their biggest clients and shareholders to make sure they understand that the deal is "positive for everybody", King said on a conference call with analysts Thursday morning.

Deal activity in the banking sector languished after the financial crisis a decade ago as stricter rules were imposed on lenders with more than $50 billion in assets and regulators barred banks with compliance issues from expanding. About one-quarter of the BB&T and SunTrust branches, 740 of them, are within two miles of each other.

The transaction pays SunTrust shareholders 1.295 BB&T shares for each SunTrust share they own.

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The two banks have a combined 92 offices in Central Florida and control $12.8 billion of deposits in Central Florida, according to the Federal Deposit Insurance Corp.

Shares of Atlanta-based SunTrust jumped 8.3 percent to $63.62, above the acquisition price, while BB&T rose 2.4 percent to $49.71. BB&T shareholders will own about 57 percent and SunTrust shareholders will own the rest.

A Wachtell Lipton memo said the speed of the approvals was evidence of an "increasingly favorable regulatory environment for bank M&A". The per share deal value of $62.85 is at a 7 percent premium to SunTrust's closing price on Wednesday, according to a Reuters calculation. "These are both very clean banks".

"It's an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services", BB&T CEO Kelly King said in a statement.

In December, BB&T said it was eliminating its Center City Allentown regional headquarters as well as positions held by Scott V. Fainor and David B. Kennedy, former executives at National Penn Bancshares and longtime Lehigh Valley bankers.