BB&T (BBT) and Suntrust (STI) have received shareholder approvals for their mega-merger.

The next hurdle will require action by the regulators. To make the overseers happy with the deal, the new firm must sell a lot of branches. But determining which assets to divest will be a challenge given the state of the banking markets.

The banks will have to sell top avid dominating certain markets in North Carolina, Georgia, Virginia and Florida after the merger closes. The temptation might be to sell off the worst-performing markets where they have too large of a presence. H

However, regulators will be watching for this action. The branches sold to relieve antitrust concerns must be viable with strong deposit and credit profiles.

BB&T Deposit Premiums Rise

Deposit premiums for branch sales have run around 4.5%. However, everyone knows the banks must sell before the banking regulators allow the deal to proceed. Would-be buyers will be interested since organic growth is almost impossible to achieve in a slow-growth world. The forced nature of the selling could limit offers at the higher end of the deposit premium range that we have seen in the year.

The two banks will want a deal in bulk to keep costs down. In markets like Atlanta and Raleigh-Durham, NC this should attainable. These are strong markets with many potential players that will be interested in expanding their operations in the area. It may be more difficult to achieve in smaller markets like Norfolk and Martinsville, Va. where they must sell assets.

Once the banks complete the process, the deal should provide hundreds of millions of dollars to the banks’ coffers. The two banks will combine under the new name: Truist. Until then, growth-oriented bankers who want to expand in the southeast and their investment bankers are going to be very busy shopping the branch sales.