BB&T in Expansion Mode

Earlier this week, Winston-Salem Journal reported that BB&T Corporation ( BBT - Analyst Report ) plans to expand its footprint in Texas. The company aims to open three new branches in central Texas.

With the addition of two new branches- in Austin and one in Frisco, BB&T will have a total of 26 branches in the state. BB&T established its foothold in the Texas market after taking over the failed Colonial Bank in 2009.

Earlier this month, BB&T Insurance Services, a subsidiary of BB&T,also announced the expansion of its operation in California with the acquisition of Precept Group, an employee benefits consulting and administrative solutions firm.

With this acquisition, BB&T will expand its footprints in attractive California market and increase headcount by 140 in its Insurance Services division. Though the terms and value of the deal remained undisclosed, the agreement was closed on November 1. BB&T will be able to improve its customer relationship and also expand its market share by improvising its consulting and administrative services for the existing clients while opening door for the new clients.

In September, BB&T Insurance Services also announced the acquisition of Atlantic Risk Management Corporation of Columbia. This acquisition will expand BB&T’s footprints in attractive metro Baltimore area along with a broader representation in Washington, D.C., area.

Further, BB&T Insurance Services announced the acquisition of San Jose, California-based Liberty Benefit Insurance Services. Liberty, a full-service employee benefit broker, would operate as BB&T-Liberty Benefit Insurance Services.

Moreover in November, BB&T announced the signing of an agreement to acquire Florida-based BankAtlantic, a wholly-owned subsidiary of BankAtlantic Bancorp Inc. ( BBX ) . The transaction would allow the company to fast track its expansion strategy in the Florida region.

Though BFC Financial Corporation ( BFCF ) , the major shareholder of BankAtlantic Bancorp’s Class A common stock, supports this deal, the agreement still is subject to regulatory approvals and customary closing conditions. Furthermore, both the companies have not specified the time of the closure of the transaction.

Upon the closure, the deal will be accretive to BB&T’s earnings per share in 2012, excluding one-time acquisition expenses. This would add 78 branches to BB&T’s 64 branch network in Florida region. However, the agreement excludes BankAtlantic Bancorp's nonperforming and other criticized assets identified as of September 30.

Besides substantially increasing BB&T’s market share and footprints, these acquisitions would also improve the company’s top line over the medium term.

Our Viewpoint

BB&T relies extensively on acquisitions and expansions to enlarge its revenue streams. Following the systems conversion of Colonial in the first half of 2010, the company is retaining capital to grab acquisition opportunities. Though BB&T mainly focuses on organic growth strategy, the company has never been averse to expand its market share through acquisitions. Going forward, management expects to maintain this balanced growth structure.

BB&T currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Considering the fundamentals, we are also maintaining our long-term “Neutral” recommendation on the shares.