Kelly King's numerous prior deals were smaller
By Rachel Louise Ensign
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 9, 2019).
A few years ago, BB&T Corp. chief executive Kelly King
purchased hundreds of copies of "Mindset: The New Psychology of
Success" and distributed them to select employees at the bank.
Carol S. Dweck's treatise on the power of hard work and optimism
could come in handy for the 70-year-old Mr. King as he embarks on
his latest challenge: combining his sprawling southeastern bank
with fellow regional giant SunTrust Banks Inc. in the biggest U.S.
bank merger in more than a decade.
Many big banks merged in shotgun marriages during the financial
crisis, but it has been 15 years since two healthy ones pursued a
combination of this size. While the potential payoff is huge -- a
more profitable lender better positioned to compete with
multitrillion-dollar rivals such as JPMorgan Chase & Co. -- so
are the pitfalls.
Mr. King, who will be the merged bank's first CEO, and his
counterpart at SunTrust and anointed successor, William H. Rogers
Jr., 61, will grapple with layoffs and branch closings. Complex
technology and compliance systems must be squared. And two
different cultures, Mr. King's quirky BB&T and Mr. Rogers's
more staid SunTrust, must become one. Complicating matters further,
the merger needs to pass muster with banking regulators who haven't
seen a deal of this size in many years.
"We know what we're getting into," Mr. King said on Thursday
after the deal was announced.
BB&T's $28.2 billion deal to buy SunTrust came together in
recent weeks, but it had roots in a yearslong friendship.
Messrs. King and Rogers would regularly huddle at banking events
to discuss how dramatically their industry was changing, Mr. King
said. User-friendly websites and mobile apps were becoming more
important to customers than the physical branch networks the two
banks had built up over decades.
Mr. King has done more deals than most other bank CEOs since the
financial crisis, but they largely involved buying much smaller
lenders and putting the BB&T name on the newly acquired
branches. That strategy has become less appealing. The handful of
megabanks with national branch networks are outspending their
smaller rivals on technology and attracting a greater share of new
checking accounts.
The two CEOs decided the best course of action was to combine
their banks, a move that would allow them to strip out $1.6 billion
in costs a year and give them more money to spend on
technology.
Mr. King felt this was the rational thing to do for his 147-year
old bank ("reality" and "reason" are among the 10 values listed in
pamphlets BB&T distributes to employees), but that doesn't mean
it will be easy.
The first challenge will be getting the merger through the
regulatory process. While the Trump administration has eased the
path for bank deals, the proposed merger already has drawn
criticism from top Democrats including House Committee on Financial
Services chairwoman Maxine Waters (D, Calif.).
On Thursday, Mr. King said he was confident that the merger
would be approved and close before the end of the year.
The banks' decision to move to a new home in Charlotte, N.C.,
could also cause trouble in the cities where they're currently
based -- Winston-Salem, N.C., for BB&T and Atlanta for
SunTrust.
They may face pressure from community groups seeking concessions
around deals, such as keeping branches open and increased lending
in lower-income areas. While not seen as a major cost, conflicts
with community groups can delay a merger's closing and bruise a
bank's reputation.
When and if the deal is approved, the messy work of combining
the two banks begins. Among the most complicated tasks: uniting
corporate cultures and keeping valuable employees and clients from
fleeing in frustration. Many similar bank "mergers of equals"
haven't worked out because of power struggles, said Mike Mayo, a
Wells Fargo & Co. analyst.
Messrs. King and Rogers say that won't be an issue, particularly
because the banks have complimentary cultures and both men have
overseen similar mergers in the past. Mr. Mayo said BB&T and
SunTrust capably navigated the integration process in prior mergers
with banks of a similar size.
SunTrust's branch network skews more urban, and it has a small
investment bank. Its executives avoid the spotlight.
The company is a pillar of the business community in Atlanta,
where its name graces the Braves' new baseball stadium. Fellow
Atlanta resident Coca-Cola Co. stored its secret Coke formula in a
SunTrust vault for more than 80 years.
BB&T was a small country bank founded in the aftermath of
the Civil War that grew through a series of deals, many of them
engineered by John A. Allison IV, the bank's longtime CEO and Mr.
King's predecessor. Mr. Allison, who frequently quoted Aristotle
and handed out copies of Ayn Rand's "Atlas Shrugged" to his
executives, persuaded BB&T's charitable arm to fund college
classes about the moral foundations of capitalism.
Mr. King, who became CEO in 2009, has poured resources into the
BB&T Leadership Institute, which runs training programs heavily
influenced by his management philosophy. At the institute, which
employs a neuropsychologist, employees are sometimes brought to
tears in courses that can shine an uncomfortable light on their
workplace behavior.
Decades ago in a similar program, Mr. King got feedback that his
6'4" height and his tendency to bang on the table for emphasis made
him an imposing figure. He now sits in meetings to appear smaller
and leans back in his chair during tense moments.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
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February 09, 2019 02:47 ET (07:47 GMT)
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