United States / Analyst Insights
BB&T Merger with SunTrust: Technology Drives Competition

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by Robert Miles, Senior Strategic Industry Analyst
Feb 11 2019

The announced merger of BB&T and SunTrust Bank is set to create a combined company asset total of $442.0 billion, making it the sixth-largest US bank by assets and deposits. After a long post-crisis drought of big bank deals, this could be an indicator of renewed interest. However, more than simply an indicator of potential trends in banking industries, the factors underscoring the deal are indicative of more pervasive secular trends at work. Namely, technology change and the delineation of winners and losers within industries by successfully leveraging the rapid pace of change.

Key deal drivers

There are key, industry-specific factors that are likely to affect the banking landscape from a deal perspective. In October 2018, regulators issued a proposal to separate liquidity requirement thresholds into four categories. This proposal can be simplified into the following segments: global systemically important banking organizations, a $700.0 billion asset threshold, a $250.0 billion asset threshold, and those with at least $100.0 billion. This, combined with what is perceived as a more accommodating regulatory environment, has the potential to accommodate larger deals. However, while regulation opens the door, the competition born of technology demands is the likely driving force.

For banks, size and technology go hand-in-hand. Size allows banks the freedom to invest in technology and technology attracts more deposits and loan activity. The digitalization of both user interface and internal bank activity is expected to be key in driving deposits as small banks succeed in personal relationships and larger banks focus on experience. The effects of technology are more than just purely a bank issue, as financial technology growth has resulted in competition from all directions. For example, the Online Payment Processing Software Developers industry (IBISWorld report OD4521) has recently been pushing growth. IBISWorld has analyzed the revolutions supported by online payments and the interconnection with banks is clear. This is best evidenced by the introduction of the “Zelle” digital payment system, of which BB&T is a partial owner.

New technology focused deals

If the BB&T and SunTrust “merger of equals” is to be the model for more deals, then regional and size comparisons may provide guidance on new activity. There are three regions* in the United States with multiple banks with less than $700.0 billion and more than $100.0 billion in assets, as of September 30, 2018. It is not clear exactly where new deals will come from, but size and location have the potential to guide attempts at efficiently scaling operations.

ast size

Note: SunTrust BK and BB&T Corp are set to merge

*Region is designated by the state listed as the bank location in the Federal Reserve Statistical Release


Edited by Emily Lidstone