DBRS Morningstar Reflects BBT STI Rebranding to Truist, Confirms and Maintains Positive Trend

Following the completion of the merger between BB&T Corporation (BB&T) and SunTrust Banks, Inc. (SunTrust), DBRS, Inc. (DBRS Morningstar) confirmed the ratings of Truist Financial Corporation (Truist or the Company), the resulting holding company, including the Company’s Long-Term Issuer Rating of A (high). At the same time, DBRS Morningstar confirmed the primary banking subsidiary, Truist Bank (the Bank), renamed from Branch Banking and Trust Company. The trend on all ratings remains Positive. The Intrinsic Assessment (IA) for the Bank is AA (low), while its Support Assessment remains SA1. The Company’s Support Assessment is SA3 and its Long-Term Issuer Rating is positioned one notch below the Bank’s IA.

KEY RATING CONSIDERATIONS
The confirmation of Truist’s ratings reflects DBRS Morningstar’s view that the combination provides attractive prospects, including greater scale and further diversification of the Company’s business mix, loan portfolio and fee income sources. Management expects that the Company will produce best-in-class profitability and efficiency ratios, while maintaining strong balance sheet fundamentals and a conservative risk profile.

While DBRS Morningstar is wary of the substantial integration risk associated with such a large transaction, particularly as it relates to culture and the shared senior management structure, these concerns are mitigated when considering BB&T’s proven track record of strengthening its franchise through selective mergers and acquisitions and successfully integrating them.

RATING DRIVERS
If Truist delivers on the transaction assumptions, the ratings could be upgraded. Conversely, failure to sustain the Company’s profitability and credit metrics, or if the merger integration is poorly executed, the trend could revert back to Stable.

RATING RATIONALE
The combined company, rebranded as Truist, becomes the sixth largest U.S. bank, with more than $440 billion in total assets and leading market share positions across an attractive footprint. While the interest rate environment has unexpectedly become a headwind since the merger was announced in February 2019, DBRS Morningstar still expects the combination to provide significant revenue growth and cost savings opportunities, while also allowing the Company to leverage its considerable scale to increase investments in technology on par with the largest U.S. banks.

Providing key support to the ratings confirmation and maintenance of the Positive trend, credit fundamentals remain strong, including an enhanced funding and liquidity profile given the greater reliance on deposit funding. Additionally, capital and asset quality remain strong and in line with pre-closing metrics. DBRS Morningstar considers the gross loan credit mark to be conservative at about 1.7% of SunTrust’s loans.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Global Methodology for Rating Banks and Banking Organisations (June 2019) and DBRS Criteria: Guarantees and Other Forms of Support (January 2019), which can be found on our website under Methodologies & Criteria.

The primary sources of information used for this rating include Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA