Bank investors are looking everywhere for the next mega-deal, with this one wrinkle

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After BB&T and SunTrust’s $66 billion merger announcement got a warm reception from markets Thursday, analysts and investors are scurrying to figure out which banks will be next.

The key to the deal’s positive reaction is that it’s been labelled a “merger of equals,” or a transaction between two similar-sized firms that can yield immediate benefits like cost cuts. BB&T climbed 2.8 percent at 11:57 am, while Suntrust had surged 8.8 percent.

“Speculation has gone through the roof that there will be more mergers of equals to follow,” said Brian Foran, a bank analyst and partner at Autonomous Research. Advisers specializing in bank deals “are probably traveling the country pitching them right now.”

With mergers of equals, companies tend to pay more reasonable valuation premiums than when a big bank acquires a smaller firm, making it more likely the transaction will pay off. Thursday’s deal created the sixth-biggest U.S. bank and was, in press materials and executive interviews, repeatedly deemed a union between two similar institutions.

Regions, Citizens and Comerica are among banks facing the most deal speculation, according to Foran. “You can see the logic of Citizens getting together with a couple different banks, like M&T and Fifth Third, or Fifth Third getting together with Huntington or KeyBank,” he said.

Analysts have long speculated that smaller banks needed to join forces to scale up their technology budgets as consumer preferences shift to mobile devices, but deals haven’t been happening. Completed bank mergers totalled $19.7 billion last year, the lowest in more than two decades, according to Refinitiv.

Whether or not Thursday’s deal – the biggest since the 2008 financial crisis – marks the beginning of a wave of consolidation depends on the human element: Can potential CEO partners set aside their egos for the greater good?

In the case of the Thursday’s deal, there is a clear succession path: BB&T CEO Kelly King will lead the combined bank until 2021, when the younger SunTrust CEO William Rogers takes over.

“A merger of equals always works in a spreadsheet,” Foran said. “In real life, sometimes it does and sometimes it doesn’t. Sometimes the two CEOs get along. Sometimes, 10 months in they start hating each other.”

Helping matters is a Federal Reserve proposal late last year that created four tiers of regulation for banks with more than $100 billion in assets. Megabanks still face the highest level of scrutiny, but now firms with less than $700 billion in assets will have lower compliance and liquidity requirements. (The yet-to-be named BB&T-SunTrust bank will have $442 billion in assets.) That clarity could nudge more bank CEOs to start flirting with their competitors.

“We will probably will see more of this,” Foran said. Regulators have created a new category of banks “that can be big, like U.S. Bancorp, but not treated like Bank of America or J.P. Morgan.”

Another question is whether the deal can close on time. BB&T and SunTrust expects it to complete by the fourth quarter of this year. If it drags out, as other recent transactions have, the combined firm risks losing employees and clients to rivals.

“Right now there’s CEOs at a Synovus or Regions blasting their entire team saying, ‘Get me the short list of people to hire from BB&T and SunTrust’,” Foran said.

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