SunTrust, BB&T could become CRE lending powerhouse in the Southeast

BB&T's acquisition of SunTrust may make the combined company more of a contender in regional metro-area commercial mortgage lending, according to data provider CrediFi.

"BB&T and SunTrust both rank in the top 10 CRE lenders for major Southeastern urban areas and their combination could rival No. 1 CRE regional lender, Wells Fargo," Ely Razin, founder and CEO of Credifi, said in an email.

SunTrust is based in Atlanta and BB&T is based in Winston-Salem, N.C. Under the merger agreement, the new combined company would be based in Charlotte, N.C.

Both banks have government-sponsored enterprise lending businesses, lend heavily to retail and industrial properties, and are involved in commercial real estate construction lending, Razin noted.

BB&T's Grandbridge Real Estate Capital was the No. 2 provider of Fannie Mae delegated underwriting and servicing financing for senior housing in 2018, and SunTrust has been amassing loan volume in the challenging retail property market.

SunTrust CRE loans that are greater than or equal to $10 million and have a meaningful retail component were up by 153% in 2018 after dropping 20% the previous year. Average loan sizes in this category were up 33% in 2018, building on a 20% increase in 2017, according to CrediFi.

Combined, SunTrust and BB&T would be the second largest regional bank in mortgages, with CRE loans representing 12% of total lending and home loans accounting for 27%.

The two companies' position in commercial real estate could be a mixed blessing for them, given concerns about nonbank competitors and rising delinquencies, among other things. But their balance sheet exposure to the sector is limited, according to CrediFi.

"Each appears to keep relatively little of their CRE originations on their books, relative to the overall size of their balance sheets," Razin said.