Large regional banks of SunTrust
and BB & T
announced on Thursday that they plan to combine a total merger of approximately $ 66 billion, which is easily the largest banking merger since the 2008 financial crisis. The merged entity will become the sixth largest bank in the US. UU With around $ 442 billion in badets, $ 301 billion in loans and $ 324 billion in deposits.
The customers of SunTrust and BB & T are not the only people who will be affected by this merger. "This agreement is going to open the floodgates to a series of more bank acquisitions and a new wave of consolidation," said Greg McBride, chief financial badyst at the personal finance website Bankrate.
A series of factors are driving the merger wave of the banking industry. Regulatory requirements introduced in the aftermath of the financial crisis have raised the cost of businesses, and merging is one way to reduce those costs. Other large regional bank mergers in recent years include a merger between Chemical Bank
and TCF Bank
Announced last month, the 2016 merger between Key Bank.
and First Niagara and the Union of Huntington Bancshares
and FirstMerit Bank, also in 2016.
"If banks do not find ways to innovate, they die."
In addition, the consolidation of resources can facilitate the development of improved mobile and online banking capabilities, said Karen Petrou, CEO of Federal Financial Analytics, a consulting firm based in Washington, DC. Failure to develop these technologies could have serious consequences for both banks and consumers.
Banks could lose customers to other financial services companies, including online banks. In general, these institutions are not as regulated as traditional banks, which means that consumer money could be at greater risk if the company with which they deposit it will be ruined.
"If banks do not find ways to innovate, they die," Petrou said. "Then, consumers should do their banking operations with non-banking entities. The migration of banking services to unregulated companies poses many risks. "
Meanwhile, SunTrust-BB & T and other mergers will have important consequences for consumers.
See also: So the Fed left interest rates unchanged, but what does that mean to you?
This is what bank customers should expect:
Not all mergers are the same
McBride generally divided bank mergers into two categories: there are mergers where the two companies do not cover the same geographic area, and then there are mergers where they do. It is the last category where customers will be most affected, he said.
And while large deals like the most recent between BB & T and SunTrust command holders, it's the smaller deals that can have the most effect on consumers. "Mergers of small banks where there are two merging banks from different small cities can have particularly damaging effects on services in the city that is lagging behind," Petrou said.
When banks merge, some services will improve
One of the biggest drivers of bank mergers is having more money to invest in technology improvements, said Brian Karimzad, co-founder and head of research at personal finance site MagnifyMoney. "What has changed since we had a large banking merger is that people carry out banking operations with an application," Karimzad said.
SunTrust customers benefit the most: BB & T, prior to the agreement, had one of the best-rated mobile banking applications in the industry and it is likely that its application will remain in place, he added.
In many cases, branches will be closed.
For existing BB & T and SunTrust customers, the merger will mean that they will have access to a wider network of branches and ATMs in general. At the same time, there is a great possibility that your local branch will close.
One of the statistics that emerged from the agreement between BB and T-SunTrust was that about 740 of the 3,100 branches of the two banks were at a distance of 2 miles from each other. That is an unsustainable model at a time when banks are already closing branches as more customers turn to online and mobile services for their banking needs.
"Otherwise, they will become Starbucks
SBUX, + 0.88%
because they are very close together, "Petrou said.
The remaining branches could also be revised. Instead of remaining as small neighborhood bank branches, they could be expanded to provide a wider range of other services, such as communal work areas or cafes.
Read more: Robinhood silently prevents users from registering for cash accounts amid scrutiny by regulators
Do not expect better prices in bank accounts and loans
A merged bank will normally have a greater market share. With less competition in the local market, consumers may see less attractive rates in checking and savings accounts and even mortgages, despite increased competition from online banks. "Until consumers and businesses become smarter about where they keep their money, most banks are not going to compete on price," McBride said.
Mergers can create administrative headaches for consumers
A merger can make any number of basic banking services complicated in the short term. Route and account numbers may change, which can complicate direct deposits and automatic bill payments. Credit card holders may need to visit a different website to pay their monthly bills, and administrative systems, such as customer service, are likely to change.
"Some of that tends to happen at a more glacial pace. But there is always a possibility of a hiccup or an error at every point, "said McBride.
Get a daily summary of the best personal finance readings delivered in your inbox. Subscribe to the free Personal Finance Daily newsletter from MarketWatch. Sign up here.