Truist has pushed back the timeline for its estimated $1.6 billion cost-savings goal, citing systems integrations and branch consolidation delays, CEO Kelly King said during the bank’s first post-merger earnings call Thursday. The bank originally anticipated it would reach the net savings goal in nine quarters. Truist now estimates it will take 12, or until the end of 2022.
As part of an agreement with regulators, Truist agreed to delay its merger-related branch closures for a year. King said the bank is also waiting for certain digital investments to formulate before it converts systems such as deposit and mortgage platforms. "This is about the digital investments we’ll be making," King said. "We want to get some of those made before we actually roll out the conversion."
Truist reported net income of $702 million for the quarter ending Dec. 31, down 7% from $754 million it reported as BB&T during last year’s comparable period. The bank said the decrease was largely a result of merger-related costs.
In the lead-up to the merger, executives at SunTrust and BB&T have said branch consolidation would spur an estimated $1.6 billion in cost savings across the combined banks’ operations.
Despite the delays, the bank is confident it will reach $1.6 billion in net savings by the end of 2022, King said Thursday.
The bank estimates it will reach about 30% of that goal by the end of 2020.
"This should not be viewed as a negative. This is a positive," King said. "It’s the same number, we’re just going to take a little bit longer to do it and make sure we do it right."
The bank is committed to picking the best systems from both BB&T and SunTrust, and the process of integration is "driving the timeline a bit longer than we thought," King said.
Having the bank’s digital value proposition in place before it converts branches would ensure “strong client retention” during the process, he said.
BB&T's $28 billion acquisition of SunTrust, which the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) approved in November, allowed the two banks to form Truist, the country’s sixth-largest bank.
The regulatory agencies approved the merger on the condition that the banks divest 30 branches and more than $2.4 billion in deposits to mitigate the competitive effects of the deal.
The deal is the largest bank merger since the 2007-08 financial crisis.