schin Posted February 26, 2019 Share Posted February 26, 2019 Last week, BB&T purchased SunTrust Bank for $24.28B. The new combined entity would have a $66B market cap and eventually make it the sixth largest bank in the US at $442 B in assets, $301 billion in loans, and $324 billion in deposits. At $24B, it's the price you have to pay to keep up with the JP Morgans ($354.5B market cap), Bank of America ($285B), Wells Fargos ($228B) and Citigroup ($154B) of the world in terms of IT, marketing, and balance sheet clout. That said, I think it's the right thing to do. But, hypothetically, what could they really buy with $24B? * BB&T could purchase Deutsche Bank ($18B) and still have change left over for a partial takeover of Commerzbank ($9B). In essence, allowing BB&T to own the whole Germany market and making it one of the largest banks in Europe and World. * BB&T could purchase Society Generale at $23B. * BB&T could purchase Standard Chartered PLC at $20B. * BB&T could purchase Unicredit SPA at $25B. (what is an extra billion among friends?) With $24B, you can see the presence/influence BB&T could have purchased in Germany, France, UK and Italy, respectively. The list could go on, but, $24B still goes a long way. The political climate probably would not lend itself to transatlantic mergers. But, there is precedent with Barclays buying the core of Lehman Brothers. Let's look at BB&T and SunTrust's post-merger market cap of $66B. * BB&T and SunTrust would be twice the market cap of Credit Suisse ($30B). * BB&T and SunTrust would be twice the market cap of The Royal Bank of Scotland Group PLC ($31B). * BB&T and SunTrust would be slightly under twice the market cap of Barclays ($35B). * BB&T and SunTrust would be larger than BNP Paribas SA, the largest bank in France at $61B. * BB&T and SunTrust would be 2/3 larger than UBS Group AG ($46B). Outside of Greece, Italy, and Spain, most EU banks are getting better. In time, the ECB will raise rates, but in the meantime, there are great bargains to be had in European. You can get a top-tier bank below tangible book value. That is unheard of most times in history. I present this to show the relative valuations of European banks and how many are overlooking them. For the JP Morgan and Bank of America's out there, it would just a 10% of their market cap. Or US Bank or other regional banks can become a "Super Regionals" -- e.g. global bank, if they really wanted to. Link to comment Share on other sites More sharing options...
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