Takeovers galore in the bank patch
We are about to see real lending in this country as well as several acquisitions in the sector.
Have you ever seen a more downgraded group than the banks? Yet they won't quit. I count downgraded bank after downgraded bank. Yet it's such a silly call to do so because we are about to see real lending in this country, and when that happens the whole focus on net interest margin will go away. The new focus will be on takeovers as book values are scrubbed clean and new colossuses can be built.
Consider the case of HomeStreet Bank (HMST), one of the best-performing IPOs from last year and a hungry regional bank with a book value that is 20% below its stock price.
When you have banks that are trading north of book value and banks trading south of book value it can often be immediately accretive for the expensive bank to buy the cheaper one.
The biggest bank that sells at a premium is Wells Fargo (WFC), and it owns more than 30% of the mortgage market. So that won't happen.
But a bank like HomeStreet can start doing fill-in acquisitions.
I am more interested in banks like First Horizon (FHN), Key (KEY), Synovus (SNV) and Regions (RF). These are all banks that were hobbled during the great recession and are scrubbed clean, but have not yet turned on the lending jets as HomeStreet has. Remember the economics of banks. Net interest margins go down if banks just sit on the cash. They can go up if the banks lend and if interest rates go higher those loans can reset.
- Also see: 'Mad Money' recap: what moves stocks
As the financial sector hits four-year highs the signs are clear. More lending's coming, so the banks that were passed by as Wells Fargo bulked up are now ready to acquire and be acquired. The fact that Key or First Horizon has not been nicked even by multiple downgrades speaks volumes for what is about to occur.
Takeovers galore in the bank patch. A necessity and an opportunity.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long KEY.
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I just want to know when they are going to start spreading it around to the common people..?
That seems to be part of the problem, right now.
If I recall in 2007 there were a ton of mergers/acquisitions that helped push the market higher. Then about a year later we know what happened, are we seeing this again? Seems like these deals always tells us it's the beginning of the end. Maybe 9 months to a year before the next major double digit correction?
Until then maybe ride the higher waves but be ready to bail, perhaps getting out in 8 months and not trying to chase the last 1 or 2 percent and risk losing much more.
if you want a history lesson listen to this hack.......he has no idea where the market is going
BUT HE DOES MAKE MONEY PUMPING AND DUMPING
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