Now that BB&T and SunTrust Banks have secured shareholder approval of their merger, another big hurdle lies ahead: selling hundreds of branches throughout the Southeast to allay antitrust concerns.
The divestitures could fetch hundreds of millions of dollars, according to analysts and banking lawyers. A deal or multiple deals — essential to obtaining a green light from regulators to form Truist Financial — could be announced within weeks.
Branch sales are likely in a dozen separate markets in North Carolina, Georgia, Virginia and Florida, because that is where the new company would have the greatest market concentration, according to data compiled by the Federal Reserve Bank of St. Louis.
The companies have said that they will
“Deposit premiums recently have been in the 5% to 7% range,” Riggins said.
The most branches are expected to be sold in Atlanta; Richmond, Norfolk and Martinsville, Va.; and Durham-Chapel Hill, N.C., according to the St. Louis Fed data. In Martinsville, for example, the new company would hold about 40% of the deposits before any divestitures. It would control about 33% of the Atlanta market, 29% in Norfolk, 24% in Durham and 21% in Richmond.
The other eight markets for likely divestitures are Lexington, South Boston and the Eastern Shore in Virginia; Lumpkin County, Wayne County and Milledgeville, Ga.; and North Lake, Fla.
The St. Louis Fed's competitive analysis is based on the
Winston-Salem, N.C., is also identified as a market where the $441 billion-asset combined company would threaten market competition. However, since Winston-Salem is BB&T’s current headquarters, the company’s deposits held in that market probably do not accurately reflect its retail and commercial deposits held there, Riggins said. Antitrust analysis is based only on retail and commercial deposits.
Regardless of how many branches they divest, BB&T and SunTrust cannot simply sell their least desirable locations, said Jeremy Hill, a lawyer at Bingham Greenebaum Doll in Indianapolis who is not involved in the deal. The branches must be strong performers.
“They don’t want you to take all of your bad branches in a certain market and sell them, if those branches are not going to be independently viable,” said Hill, who recently advised German American Bancorp in Jasper, Ind., on its acquisition of Citizens First in Bowling Green, Ky.
BB&T and SunTrust have not yet named specific locations for divestitures but have said
Mike McCoy, a SunTrust spokesman, said the companies expect to divest some branches and they will “engage with the DOJ” on those plans. A BB&T spokesman declined to comment.
Though BB&T and SunTrust could make a healthy profit from the branch sales, the primary reason for divesting branches is to gain regulatory approval, Riggins said. In Huntington Bancshares’ 2016
When KeyCorp
Numerous rival banks should be very interested in acquiring the branches that BB&T and SunTrust will divest, said Kevin Fitzsimmons, an analyst at D.A. Davidson. While that competition could put upward pressure on the sale price, the bidding banks also know that BB&T and SunTrust must sell.
BB&T and SunTrust will want to limit the number of buyers to contain merger-related expenses, Fitzsimmons said.
“Maybe selling them all to one institution would be easier from a logistics standpoint,” Fitzsimmons said.
The most likely buyers are large community banks in the markets in question, Riggins said. BB&T and SunTrust likely will try to avoid selling branches to large banks that could become bigger competitors in those markets.
Many bankers have sought to take advantage of the uncertainty in the minds of employees and customers of the merging banks. Sam Tortorici, CEO of the $17.5 billion-asset Cadence Bancorp. in Houston, said in February that he was recruiting teams of loan officers from BB&T and SunTrust.
“With a major merger of equals there's significant disruption, and you typically do see a lot of change of personnel and people looking at other options,” Tortorici said.
The $12.8 billion-asset United Community Banks in Blairsville, Ga., has
“It’s hard given our size to compete inside the perimeter of Atlanta,” CEO Lynn Harton said in June, explaining why United Community has expanded outside central Atlanta.
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