Can “Truist” Rebuild Trust?

On June 12, SunTrust (NYSE: STI) and BB&T (NYSE: BBT) announced that the name of their merged entity will be Truist after the two banks consummate their marriage later this year. Once the merger is complete, Truist will be the sixth-largest bank (ranked by total assets) in the United States.

The new name is telling since it appears to be a ploy to capitalize on the lack of trust engendered by Wells Fargo (NYSE: WFC). Once considered a rock solid bank, WFC has been mired in a public relations nightmare over the past three years.

Wells Fargo has been fined more than $2 billion by various state and federal regulators over a scheme that resulted in millions of fraudulent accounts being opened without the customers’ knowledge. Since peaking above $66 in January 2018, shares of WFC have lost nearly a third of their value.

That amounts to roughly $100 billion of stock market valuation down the tubes, a fate Truist would dearly like to avoid. The Wells Fargo scandal has put customers of all banks on high alert. One whiff of funny business and they are likely to move their money to another bank.

Shotgun Wedding

First, I need to make a quick disclosure; I worked as a financial advisor for SunTrust from 2008–2012. That span encompassed the Great Recession, which was an especially unsettling period to be working for any bank.

At that time, nobody knew which banks would survive and which would fail. SunTrust did a lot of mortgage lending in Florida. I worried that it might be forced into liquidating its assets if the real estate market did not recover.

Fortunately, SunTrust had sufficient resources to ride out that storm and fully recover. From January 2012 through January 2018, STI more than tripled in value. However, last year’s stock market correction was particularly brutal for SunTrust. Its share price dropped from above $74 in September to less than $50 three months later.

At a recent share price of $63, STI has gone nowhere during the last 18 months. Meanwhile, BB&T’s share price was also receding, surrendering 10% of its value over the past year.

With Wells Fargo unraveling and the Federal Reserve reversing course on interest rate hikes, the executives at SunTrust and BB&T must have reckoned the only way to get bigger was to merge. Thus, a marriage of convenience that produced Truist.

What’s in a Name?

SunTrust itself was the result of several mergers. Perhaps the most significant of which involved SunBanks of Florida in 1985. Later, the bank acquired Crestar which expanded its southeastern footprint into the Washington, DC market.

Of course, most Washingtonians do not associate their locale with sunny weather as do many Floridians. So, the name SunTrust never really resonated with the local population. For that matter, neither did Crestar. Some customers joked it sounded more like the name of a brand of toothpaste.

Speaking of names, I also once worked for Sovran Bank. Sovran’s competitors claimed its name was a mashup of the “Soviet Iranian” bank (even though there never was such a thing). That institution is now part of Bank of America (NYSE: BAC), whose name makes perfectly clear where its loyalties lay.

But all that name changing calls into question the value of a bank’s name in the first place. Simply put, it is difficult for customers to remain loyal to a brand when the brand is constantly changing.

All of which begs the question: What impact will the name Truist have on its ability to attract and retain profitable banking relationships?

Talk Is Cheap

To hear the two banks’ executives tell it, the new name means everything.

BB&T Chairman and Chief Executive Officer Kelly S. King, who will serve as the Chairman and CEO of the combined company, waxed enthusiastic:

With the merger of equals, our goal is to create a bold, transformative organization that delivers a smarter and easier client experience through technology and human connection. True to the heritage of both companies, Truist will reflect what we stand for — a shared belief in building a better future for our clients and communities.

His counterpart at SunTrust did him one better. SunTrust Chief Executive Officer Bill Rogers will be President and Chief Operating Officer of the combined company until he succeeds King as Chief Executive Officer in September 2021. Rogers said:

Truist is a brand name representative of two mission- and purpose-driven companies coming together to serve our clients as a true financial partner. As part of our relentless pursuit to create a better experience, we’re making a commitment to always look forward, pursue what’s next and strive to do more to further financial well-being for everyone.

Quite frankly, I don’t think the new name will make much difference. In fact, the corporate moniker Truist already is getting ridiculed on social media. By now, bank customers won’t be fooled by a name change or cliché-laden slogan. They know they have choices, and will comparison shop for mortgage rates and car loans.

What will matter is how well the company is able to deliver on the lofty promises implied by its new name. Yes, there will be cost savings that should goose next year’s operating results. But once those efficiencies have been realized, the only way to become more profitable is to gain market share.

I hope it works, but I don’t see much upside potential in this deal in the near term no matter they call it.

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