Ahead of the Bell: Analyst says BB&T might merge

An analyst said the recent change at the helm of BB&T Corp. could lead to a merger between the regional bank and another similarly sized bank.

Ladenburg Thalmann analyst Richard Bove wrote in a research note Thursday night that BB&T's announcement that current chief executive John Allison stepping down at the end of the year to be replaced by Kelly King could lead to a merger.

Bove noted Allison would not likely consider a merger of equals, while King may be more open to the idea.

In what Bove noted was "pure speculation," he said Fifth Third Bancorp could be a potential partner. Fifth Third has shown interest in moving into the Southeast, where BB&T is based, Bove wrote in a note. BB&T's headquarters are in Winston-Salem, N.C.

BB&T on the other hand was eyeing a move into the Midwest before it stopped acquiring banks, Bove wrote in the note. Fifth Third is based in Cincinnati.

Aside from speculating on a potential merger, Bove cut his earnings estimates for BB&T because of an expected rise in loan losses on the bank's land development loans in Atlanta and continued weakness in home equity and mortgage portfolios.

Bove cut his 2008 earnings estimate to $2.89 per share from $2.93 per share. He cut his 2009 estimate to $2.96 per share from $3.08 per share and his 2010 estimate to $3.55 per share from $3.59 per share.

Bove did, however, increase his price target to $35 from $31 and maintain a "Buy" rating on the stock.

Shares of BB&T closed Thursday at $29.22.