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Why the biggest bank merger in 15 years matters to credit unions

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The blockbuster merger between BB&T and SunTrust Banks has credit unions salivating.

On Thursday, BB&T in Winston-Salem, N.C., said it would buy SunTrust Banks in Atlanta in an all-stock deal valued at roughly $28 billion. The combined institution will have roughly $442 billion in assets and will be headquartered in Charlotte, N.C., where a new innovation center will also be based.

Credit unions will look for opportunities to pick up customers and employees who are unhappy with the impending changes.

“I think we can capitalize on their growing pains as they transition,” said Joe Mecca, vice president of communication at Coastal Credit Union in Raleigh, N.C. “We saw consumer dissatisfaction when Wells [and] Wachovia merge[d]. We saw it when [Central Carolina Bank and Trust and] SunTrust merged. A lot of customers might be in play.”

Financial services in North Carolina has undergone massive consolidation and changes over the years. A number of banks in the Tar Heel State have sold during the last few years. That inspired Truliant Federal Credit Union in Winston-Salem to run a marketing campaign in 2017 promising to never merge.

Mega mergers have also created disruption. Wells Fargo bought Charlotte, N.C.-based Wachovia in 2008 for $15.1 billion. PNC Financial Services Group acquired the U.S. retail banking division of Royal Bank of Canada in 2011. That unit was based in Charlotte.

The $3.2 billion-asset Coastal Credit Union took advantage of that merger and “attracted a lot of RBC talent after their merger with PNC,” according to Mecca.

“Depending on where jobs are affected, credit unions could see some opportunities,” Mecca added.

The timing of the deal also coincides with the Credit Union National Association’s Open Your Eyes campaign that is picking up steam. The initiative aims to raise awareness of credit unions, and Coastal has committed $2 million to the $100 million effort. That campaign could further help credit unions in promoting themselves to potential members and employees.

Still, North Carolina credit unions will have to work to retain their own membership base. To do so, John Stockamp, a director in West Monroe Partners' financial services practice, advised CUs to remind their members about the benefits of a credit union and what distinguishes their institutions from a big bank.

“They need to understand what their value differentiation is, what their value proposition is for members and make sure that members understand that because members might be looking at this shiny new object with a big brand,” Stockamp said.

Credit union trade associations are also taking a critical eye to the BB&T-SunTrust merger. Banking trade groups were similarly unhappy last month after Progressive Credit Union merged into Pentagon Federal Credit Union.

The deal, which is the largest bank acquisition since 2004 when JPMorgan Chase bought Bank One, arrives as regional banks struggle to keep up with national brands, such as Bank of America and Citigroup.

"The fact is, mergers have become common within the financial services industry as a result of regulatory burdens, increased competition and technology costs, and I would expect this trend to continue,” Dan Berger, president and CEO of National Association of Federally-Insured Credit Unions, said in an e-mail. “Jokingly, we all should know that merging two banking dinosaurs should not be expected to give rise to a beautiful gazelle.”

The merger also highlights the fundamental differences between credit unions and banks, according to Ryan Donovan, chief advocacy officer of CUNA.

“The greatest threat to small banks today are large banks like the one BB&T and SunTrust are creating through this merger,” Donovan said in an e-mail.

“When credit unions merge, members and communities win," he continued. "When big banks like BB&T and SunTrust merge, stockholders win and communities often find themselves with fewer options.”

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