STAYIN' ALIVE.

• Author: Mildenberg, David

Truist's merger has investors shaking. Leaders say it's all right, it's OK.

B&T got very big when it decided to merge with SunTrust to create the nation's sixth-largest bank in February 2019. The verdict is out on whether the combined Truist Financial got better.

Chief Financial Officer Mike Maguire stresses that the premise underlying the merger is intact four years later: Truist has a powerful, 17-state franchise rooted in many fast-growing Sun Belt markets. With more than $550 billion in assets, 53,000 employees and a solid capital base, it has the resources to compete effectively with the four U.S. megabanks and thousands of smaller institutions, ranging from community banks to regional lenders like Regions or Fifth Third.

"After navigating a global pandemic and the recent headwinds in the banking industry, we feel quite good about our financial strength and the power of our franchise," Maguire says.

The deal has been a benefit for Charlotte, where CEOs William Rogers of SunTrust and Kelly King of BB&T agreed to place the headquarters in a 47-story downtown tower topped by a massive Truist sign. Eschewing Atlanta and Winston-Salem, Rogers and King chose the Queen City as its anchor and favored a new brand, epitomizing a "merger of equals" in which the best of both banks would emerge to create a stronger institution.

Like most big mergers, however, this one has been tougher than expected. Maguire acknowledges that, citing the pandemic and various other factors. "The merger took a heckuva longer than anyone thought it would. Heck, they were still talking about it during the last quarterly conference call," says John Norris, head of investments at Birmingham, Alabama-based Oakworth Capital Bank. It does not own Truist shares.

Particularly for investors, the deal has been a disappointment. As of mid-August, Truist stock had declined more than 40% since the deal's disclosure. That's among the worst performances of the big U.S. banks, and compares with a 63% increase in the S&P 500 Index in that same period. That's stung the BB&T shareholders that controlled 57% of the combined shares when the transaction closed.

Analysts blame unfulfilled pledges for increased growth and cost-cutting that were made by King and Rogers in 2019. More recently, fears of pending losses from commercial real estate loans and investments bought and loans made before interest rates shot up have pressured bank stocks.

Unfortunately for Truist, the environment didn't get any easier this summer. Lenders face additional pressure from ratings agencies as regulators consider boosting capital standards for banks with assets of more than $100 billion. The goal is to make them better prepared for shocks such as the March collapse of the $210 billion Silicon Valley Bank, the third-largest bank failure in U.S. history. Forcing banks to hold more reserves can lead to curtailed lending, reduced profitability and delayed dividend increases or stock buybacks. That is happening at Truist, experts say.

In August, Moody's Investor...