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Merger Tests Veteran CEO At BB&T -- WSJ

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02/09/2019 | 02:48am EDT

Kelly King's numerous prior deals were smaller

By Rachel Louise Ensign 

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

 

Stocks mentioned in the article
ChangeLast1st jan.
BB&T CORPORATION -0.98% 49.35 Delayed Quote.13.92%
SUNTRUST BANKS -0.44% 63.49 Delayed Quote.25.87%
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