BB&T and SunTrust $66bn merger leads to mega tech revamp
The titanic $66-billion merger between BB&T and SunTrust has created the sixth-largest US bank and the chance to spend an additional $100 million on technology.
“Disrupt our business or be disrupted”
Both of them are up against the big names of Citi, JP Morgan and Goldman Sachs. Those three are often active and have been investing in several start-ups.
Thanks to the US Office of the Comptroller of the Currency (OCC) accepting applications for national bank charters from non-depository fintech firms, a whole swathe of new challengers has sprung up. They’re all covered here in this handy list.
BB&T and SunTrust are well aware of these threats, and in fact BB&T CEO Kelly S. King did say in the past: “We face a fundamental choice – disrupt our business or be disrupted.”
In their merger, the pro forma company will have approximately $442 billion in assets, $301 billion in loans, and $324 billion in deposits serving more than ten million households in the US.
A new corporate headquarters will be established in Charlotte, North Carolina, including an Innovation and Technology Centre for digital transformation plans.
The two banks are looking to invest in cybersecurity, mobile, and automation. SunTrust and BB&T told investors they plan to spend an additional $100 million on technology.
“Our clients now demand what I call real-time satisfaction – they want what they want, when they want it,” King told CNBC’s ‘Squawk on the Street’. “We are all facing an increasing set of complex economic realities where we have to invest more and more in technology.”
For example, JP Morgan Chase has committed $10.8 billion to technology in 2018, according to its annual shareholder letter. Bank of America had $16 billion on reserve for global technology and operations in 2017, while 20% of Citi’s entire budget is dedicated to technology spending.
In 2017, BB&T set aside up to $50 million to invest in or acquire emerging digital technology companies.
Due to the advance of mobile, BB&T closed 148 branches in 2017 or about 7% of the bank’s total branches, and planned to close about 150 more in 2018. The SunTrust deal should result in some consolidation between the banks’ 750 branches that are within two miles of each other, the CEO says.
However, revamps don’t always go to plan.
As FinTech Futures exclusively reported in March 2018, BB&T was believed to have halted the project to implement a new core banking system from SAP. The bank initially unveiled its plans for a “gradual renovation” of its core banking technology landscape in 2016 at SAP’s annual Sapphire conference.
BB&T and SunTrust have a range of legacy systems accumulated over the years and through M&A. For example, both banks are understood to be using FIS’s ACBS solution for syndicated lending and SunTrust also has FIS’s Systematics for core banking.
In terms of this 2019 merger and the tech implications, FinTech Futures has contacted both banks about their core system plans.
It sounds like the due-diligence analysts didn’t allow enough “lifeboats” for this “titanic” event. $100 million may pay for some additional apps but paying for the seamless consolidation of two drastically disparate core systems will take a few billion dollars and ten years before the sun will shine and digital banking will become real. Did any director from the two banks ask about the risk of unifying huge IT environments?