Investors should buy BB&T’s $750 million common stock offering if they can, Cramer said Monday. The deal’s quick turnaround and the market’s sharp declines today may offer a “terrific opportunity” to buy the stock “on the cheap.”
Cramer named BB&T as one of a select few FDIC-blessed banks that should emerge from the recession as a new powerhouse. As lesser competitors fold, Chairwoman Sheila Bair sells their assets at a discount to healthy institutions like BB&T. And that’s just what happened last Friday when she brokered a deal between the Winston-Salem, N.C., company and the failed Colonial Bank of Montgomery, Ala. This good fortune is the major reason Cramer is so bullish on BBT.
A new breed of major players popped during the savings-and-loan crisis of the early 1990s as a result of similar FDIC involvement, and Cramer saw BB&T as a beneficiary this time around. The bank will buy $22 billion of Colonial’s assets, but take on none of the legal liability for the suspected accounting irregularities at the company’s mortgage unit. Plus, BB&T entered a loss-sharing agreement with the FDIC to soften the impact of taking on those assets. And BB&T has written down such a significant portion of Colonial’s loan portfolio, Cramer said, that only a worst-case scenario would prevent it from seeing “enormous upside.”
Best part: While many mergers are dilutive, this deal is accretive, meaning it will boost BB&T’s earnings per share. That should push up the stock price. Also, as a result of the deal, BB&T is now the fourth and fifth top-ranked bank in Alabama and Florida, respectively. Florida is a key fast-growing market, and Alabama could offer growth as well once the economy turns around.
Cramer said there might be some stock from that common-stock offering kicking around Tuesday morning. If investors can get in on it, great. Otherwise they should take a pass and wait for a better entry point. The last time BB&T sold new shares the share price jumped 10% before falling close to the offering price. Then the stock soared to $28 from $20.
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