Magazine article American Banker

Sharp Relative Increase Inspires BB&T Downgrade

Magazine article American Banker

Sharp Relative Increase Inspires BB&T Downgrade

Article excerpt

BB&T Corp.'s shares are up 4% this year, but Jennifer Thompson, an analyst at National Bank of Canada's Putnam Lovell Securities Inc., says that increase is too much in comparison with other companies in its sector.

Ms. Thompson downgraded the stock Monday to "underperform" from "sector perform" and said it should trade at a discount to the shares of other regional banking companies, because its acquisitive strategy has some risk.

The $78 billion-asset company is one of the most active acquirers in banking, and analysts and investors agree that it is one of the best in integrating its acquisitions. But despite its stellar record, Ms. Thompson said Tuesday that there are inherent risks in such a strategy and that investors should take that into consideration.

"BB&T has proven to be an effective acquirer," she said. "The risk is less than at other banks, but it is not zero."

The Winston-Salem, N.C., company suffered a setback on Oct. 31, when it announced that the Office of Thrift Supervision had forced it to stop takeover talks with FloridaFirst Bancorp Inc. of Lakeland, which it had agreed to buy on Oct. 3. The regulator said that BB&T had failed to seek the appropriate approval for entering into negotiations.

Tom A. Nicholson, BB&T's head of investor relations, said it is still committed to the deal, which, pending OTS approval, could close in the third quarter. The agency has indicated that a green-light for restarting talks could be granted in March, he said.

The company's stock has not suffered much of a setback. Since falling on the day the OTS order was disclosed, the shares have recovered 3.3% of their value. On Tuesday they closed down 0.4%, at $37.45. The overall market, which closed early for the holiday, also fell. The American Banker index of 225 banks declined 1.42%, while the Standard & Poor's 500 fell 0. …

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