The SunTrust-BB&T Merger Could Be Bad News For Atlanta's Economic Future
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ATLANTA — Days after SunTrust made its stunning announcement that it was merging with North Carolina-based BB&T and would move the combined bank's headquarters to Charlotte, some are expressing concern over what this may mean for future Atlanta development, business and economic prospects.
“BB&T will continue to invest as long as Atlanta is a booming market for them. [But] it's going to be much more around the numbers versus necessarily just the fact that [Atlanta was] its headquarters,” said Joel Prius, a senior director for bank consulting firm Cornerstone Advisors. “Atlanta is no longer the headquarters. It's just another market."
The $66B merger means Atlanta is not only losing a corporate headquarters, but also a hometown bank that grew with the city to become the sixth-largest in the U.S. SunTrust is the largest bank in Georgia by deposits.
SunTrust and BB&T executives have described the pending merger, an all-stock transaction, as one of equals, creating a yet-unnamed bank that will tally more than $400B in assets, $300B in loans and $324B in deposits with more than 10 million households in the U.S.
One former executive with SunTrust, who agreed to an interview on the condition of anonymity, questioned the assertion that this merger was one of two equal companies.
“To call it a merger of equals, I laugh. It is not a merger of equals. It's impossible,” the former executive said. "At the end of the day, who's running the place for the first two years? BB&T. They're the surviving stock. They got the largest ownership of the stock. They're going to be in charge. They tried to make it a merger of equals, but somebody has to be on top."
Of course, there are immediate questions regarding the combined companies' office footprint in Atlanta — both occupy space in prominent office towers in the city — as well as the prospect of headcount and branch reductions.
Neither BB&T nor SunTrust has yet to detail how many layoffs or branch closures will occur, if any. But the companies expect the merger will lead to $1.6B in annual cost reductions by 2022.
The new bank will maintain a community banking center in Winston-Salem, North Carolina, while its wholesale banking group will remain in Atlanta, BB&T spokesperson David White wrote in an email.
“This continued strong presence is also supported by the combined company's commitment to increase the respective banks' current levels of community investment,” White wrote.
The job impact may be bigger on Atlanta than Charlotte both in terms of initial cuts and future hiring. The new bank will be more inclined to increase payroll at its headquarters than in Atlanta, Georgia Tech's Scheller College of Business Professor of Finance Sudheer Chava said. There also is a big overlap in bank branches in Georgia, with BB&T operating 137 locations to SunTrust's 229, Chava said.
“Charlotte has kind of regained its status [as a banking capital]," CCIM Institute Chief Economist KC Conway said. “There's just a ton of technicals that go with that when you go to Charlotte and not Atlanta.”
For its part, SunTrust officials deny the newly merged company will decrease its commitment to Metro Atlanta.
"We’re confident the SunTrust/BB&T combination will be positive for consumers and communities," SunTrust spokesperson Sue Mallino wrote in an email. "We will maintain a significant presence in Atlanta after the close of the merger. Both companies have committed to increase levels of community investment in their current home markets, Atlanta and Winston-Salem respectively."
As an example, SunTrust CEO Bill Rogers hosted an event Tuesday evening for Grady Hospital at SunTrust Park.
Experts say it could take time to feel the full brunt of losing SunTrust. But it could be felt in everything from the ability by local developers to grab preferable financing for projects, to charities and nonprofits receiving donations and support from a hometown benefactor.
While few expect getting loans from the new bank will be more difficult for the average consumer, getting grand development projects from blueprints to reality with the help of SunTrust loans may get harder. Esperance Private Equity Managing Partner Robin Lee Allen said by 2020, he would not be surprised to see SunTrust decrease loan origination for Atlanta projects and companies, but not by a huge amount.
Right now, Georgia is the second-largest market for SunTrust loans: $10B, or 13% of its loan pool, according to financial information filed with the Securities and Exchange Commission. SunTrust's largest market is Florida, where it has $12.8B in loans.
Allen said the bigger impact may be the cost of capital for those seeking loans from the new bank, especially in Atlanta. After all, relationships are key in banking, and local relationships with key executives likely worked in favor of many a developer or business in the metro area, Allen said.
“When things start shifting around and people start disappearing from offices, those sweetheart deals can't be made anymore,” he said.
Conway said the loss of banking headquarters has big impacts on the growth of a community as well, especially in achieving financing for banner community projects.
“The Braves would have probably had a difficult challenge,” Conway said of the Major League Baseball franchise's new mixed-use stadium development in suburban Cobb County. SunTrust was a major lender on that project and purchased the naming rights to SunTrust Park.
“The loss of a major bank like that … has implications for financing big things,” Conway said. “It's important to preserve these large banks in your market. They get things done.”
That is the beauty of having a major bank headquartered in a local city, Prius said. It wants to be a player in the local market, versus just another lender.
“It's a driver behind being able to support the growth [of a community] and provide those financial services,” Prius said. “The bank's ability to fund those projects as well as take on some of the risks and some of the projects that may not be totally clear as far as [their] ability to succeed … might be more along the lines of, 'We need to do this for the local market, and it's an acceptable risk.'”
The former SunTrust executive agreed with that assessment, and doubts that the Braves would have been able to duplicate that deal if they were to have proposed it two or three years from now.
“That deal got done because it was the hometown team, and the CEO was a huge Braves fan. Five years from now, whoever is running BB&T won't think any differently of Atlanta than they do any other community,” the source said. “When you know your community as well as you do with your headquarters there, and you know the people as well as you do, you can step up and take a higher level of risk.”
Braves Development Co. CEO Mike Plant declined to speculate on the initial development of SunTrust Park, but wrote in an email that the ongoing second phase of The Battery has “tremendous amount of interest from lending institutions.”
Not everyone sees the sky falling with Atlanta's loss of a major banking headquarters.
“It's sad to lose a Fortune 500 corporate headquarters. I don't think there's a way to spin it as a positive. It's neutral,” Ackerman & Co. President Kris Miller said. But he said the function of extending credit out to developers and businesses has little to do with where a bank's headquarters is housed. It is about the strength of the market.
“Atlanta is an extremely creditworthy city because we have a lot of [momentum] here,” Miller said.
Rival banks will look to take advantage of this in an attempt to grab more market share. But experts say BB&T and SunTrust will want to preserve their business in Atlanta and the other cities where they operate.
“BB&T is not going to squander that advantage that SunTrust had," Emory University's Goizueta Business School Associate Professor Thomas Smith said. "Otherwise, why merge?”
UPDATE, FEB. 20, 4 P.M. ET: SunTrust CEO Bill Rogers was hosting a Grady Hospital event at SunTrust Park Tuesday evening, a SunTrust spokesperson said. This story has been updated to reflect the new information.