Banking Industry Consolidation Raises Questions About Future of Two Major Banks

Strategic Insights -

The latest deal in the banking industry has left the future of two major banks, Wachovia Corp. and BB&T Corp., uncertain as the trend of buyouts and mergers continues to shape the landscape. Analyst Michael Ancell of Edward Jones warned that banks that delay in expanding may find themselves at a competitive disadvantage, while others like SunTrust Banks Inc. are aggressively pursuing growth through acquisitions.

Key Takeaways:

  • The SunTrust/Crestar deal, worth $8.6 billion, creates the 10th largest U.S. bank and may make it harder for Wachovia and BB&T to expand along the East Coast.
  • Analysts believe that SunTrust could follow up its buyout of Crestar with a move into North Carolina, potentially targeting Wachovia or BB&T.
  • Wachovia's CEO, L.M. "Bud" Baker, stated that the bank will continue to pursue acquisitions if they make sense, and listed Alabama, Tennessee, and Maryland as potential expansion targets.
  • BB&T executives said they will continue searching for banks to buy in the Southeast, including Georgia, Tennessee, Maryland, Alabama, and West Virginia.
  • The banking industry is facing consolidation, with some observers predicting that up to 50% of the 9,100 U.S. banks may disappear in the next 10 years.

Statistics:

  • $8.6 billion: The value of the SunTrust/Crestar deal.
  • 10th largest U.S. bank: The ranking of the combined SunTrust/Crestar entity.
  • 16th largest U.S. bank: The ranking of Wachovia Corp.
  • $64 billion: The assets of Wachovia Corp.
  • 9,100: The number of U.S. banks.
  • 50%: The predicted rate of elimination of U.S. banks in the next 10 years.

Sources:

  • Bloomberg News
  • Edward Jones
  • Blackrock Inc.
  • Ryan, Beck & Co.
  • Wachovia Corp.
  • BB&T Corp.
  • SunTrust Banks Inc.
  • NationsBank Corp.