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BB&T CEO King: No longer expect to see much big-bank M&A

BB&T Corp. CEO Kelly King said the bank was "laser-focused" on organic growth and that he has reduced his expectations for large-bank consolidation across the industry due to advancements in some shared technology solutions.

King's tone during the Oct. 18 earnings call differed from the company's second-quarter call, when King said the bank would be interested in a $30 billion in-market acquisition. At the time, King said he had been approached by some banks looking to sell. King said on the company's third-quarter call that the comments he made about the BB&T M&A during its last quarterly call were taken out of context. He noted on the third-quarter call that his view had never materially changed.

"I did not intend to convey that we were actively pursuing. In fact, I think I said I hadn't made an outgoing call with regard to mergers in several years, which is true. So we are laser-focused on organic growth, and that's my message, and I hope it's understood," King said.

The bank's stock reacted negatively after its second-quarter earnings call as the market has sold off on many large bank deals. On Oct. 18, BB&T's stock rose 1.82% as of 10:02 a.m. ET following King's premarket comments that the bank would focus on organic growth.

During the call, an analyst asked if any downturn in the economic cycle would provide an opportunity to pursue a large-bank acquisition. King said he was no longer as confident that there would be consolidation among large banks generally.

"To be honest, I don't really expect to see a lot of big M&A, big-bank mergers. I really don't. At one time I did, as you know, but I don't expect to see that today," he said.

King said there has been significant movement in the development of systems that can be shared across multiple banks, reducing the need and benefits of massive scale, something he called a relatively recent phenomenon.

"Historically, I felt in terms of you had to get your scale to get your cost-per-unit down because you had to build all these systems all yourself. We're now looking at some systems improvements where we're not going to have to build it ourselves. There's a real movement inside industry and outside providers to use a shared utility concept where it's possible for organizations to plug into a shared utility," King said, specifically highlighting initiatives from the Bank Policy Institute and The Clearing House.

For BB&T, one of the reasons for increased interest in the bank's appetite for M&A has been its expected exit from a regulatory consent order regarding compliance with the Bank Secrecy Act. King said the bank still expects to exit the order shortly. He said the bank has largely completed what it needed to do but was still finishing an automation program related to BSA compliance, which should be completed by the end of the year. King said he expects regulators to approve of the systems as the bank heads into the 2019 first quarter, if not before.