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5 Bank Takeout Targets, Up to 26% Upside: KBW


According to Penala, the "most logical buyer" for GE's private label card portfolio could be Citigroup. "At a 5% premium, a deal for the GE portfolio would be 10% accretive to EPS, and we estimate that C could rebuild Basel 3 capital back to 9.9% by 4Q13," Penala wrote. Then again, the analyst added that Citigroup "is highly sensitive to creating new intangibles, and we think it is unlikely C would bid a significant premium -- if any."

Potential Buyers

KBW analyst Frank Barlow in a note to clients on Tuesday said that banking industry M&A volume is "disappointing given the increased chatter about M&A we heard about at our February bank conference."

Based on comments from executives during earnings conference calls, while leaving out neutral on-the-fence comments, "larger buyers appear more hesitant about M&A than their smaller counterparts," according to Barlow. "The median buyer with negative commentary is $10.5B in size versus $5.3B for those with positive commentary (excluding the large regionals)," he wrote.

KBW maintains lists of potential buyers and sellers among regional banks. The firm on Tuesday updated the potential buyers list to include five large regional banks, although the three that discussed potential deals during their conference calls "were negative about their near-term M&A prospects," according to Barlow. The five large regional banks now on KBW's list of potential buyers include Comerica (CMA) of Dallas, Fifth Third Bancorp (FITB) of Cincinnati, M&T Bank (MTB) of Buffalo, N.Y., U.S. Bancorp (USB) of Minneapolis and BB&T (BBT) of Winston-Salem, N.C.

Following the completion of the Federal Reserve's stress tests in March, the regulator announced that BB&T would be required to file a revised 2013 capital plan by the end of the third quarter, since its original plan was rejected "based on "a qualitative assessment."

M&T is working to complete its pending acquisition of Hudson City Bancorp (HCBK), which was announced last August. M&T announced in April that the Federal Reserve had "identified certain regulatory concerns with M&T's procedures, systems and processes relating to M&T's Bank Secrecy Act and anti-money-laundering compliance program," which would delay approval of the Hudson City deal. M&T and Hudson City extended "the date after which either party may elect to terminate the merger agreement if the merger has not yet been completed," to Jan. 31, 2014, but the two companies also said there were "no assurances" the deal would be completed. Shareholders of both companies approved the merger.

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