Bank Consolidations Could Bring Big Profits

Wachovia (WB Quote - Cramer on WB - Stock Picks), Washington Mutual (WM Quote - Cramer on WM - Stock Picks), now Sovereign (SOV Quote - Cramer on SOV - Stock Picks) with Santander (STD Quote - Cramer on STD - Stock Picks), which I had no idea was healthy enough to buy anything but can put the bad loans to TARP like all of the others. Seems like the bank-buying spree has begun in earnest and all of the regionals could now go: Comerica (CMA Quote - Cramer on CMA - Stock Picks), First Horizon (FHN Quote - Cramer on FHN - Stock Picks), National City (NCC Quote - Cramer on NCC - Stock Picks), Suntrust (STI Quote - Cramer on STI - Stock Picks). They can all be bought by Bank of America (BAC Quote - Cramer on BAC - Stock Picks), U.S. Bancorp (USB Quote - Cramer on USB - Stock Picks) -- still not heard from -- Goldman Sachs (GS Quote - Cramer on GS - Stock Picks) and JPMorgan (JPM Quote - Cramer on JPM - Stock Picks).

The question will be Citigroup (C Quote - Cramer on C - Stock Picks). The money to the banks is supposed to go to "well-capitalized" banks that want to lend. Is Citigroup eligible? It is time to stop dancing around the question and figure out what the government is going to do with this bank now that it was denied the sweetheart deal to take the deposits from Wachovia with guarantees.

There's a bigger issue, which is that we have obviously waived any concentration issues, and banks can own as much as they want of the nation. That means when the smoke clears, you are going to have some superbanks that could be the nationwide lenders that survive.

No wonder Santander wants in -- there will be so few banks that bank margins can rise and fees can rise and therefore the profits can rise. That plus the yield curve is so much more advantageous that we could be in a moment where banks go from big losers to big winners if they are willing to take the money from the feds and shed the bad loans. That's a recipe for an expanding P/E and a great moment for bank investing. What I would do is wait until the really bad quarters get reported and the numbers get cut -- you could get a more advantageous moment.

The one thing that does gnaw at me is that nothing has worked so far, so any hope that "this is it" has to be tempered by the failure of everything else. We don't have a plan to revive housing on the ground, just to get rid of some of the bad loans and forestall personal bankruptcies and foreclosures, but it isn't happening fast enough. Too much time is passing, with each month bringing too many new foreclosures to handle.

It is possible that we will not see the lows of Friday again because of these plans. That, too, has been something that hasn't been a good bet. I say watch BAC -- if that stock stays above the print price from that miserable offering, we could be out of the woods. Why would this be different from the big failed Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) offering? Because even after the offering, MER didn't have the money. This time the money could be unlimited for those who need it, so if there is a faltering at BAC then you could find BAC taking money, taking even more dilution -- I think we will make it bank common -- and then be rising up.

At the time of publication, Cramer was long Goldman Sachs and JPMorgan.