June 13 (Bloomberg) -- Royal Bank of Canada, the country's biggest lender, is ``well positioned'' to buy U.S. regional lenders such as BB&T Corp. or Regions Financial Corp. because of depressed prices, CIBC World Markets analyst Darko Mihelic said.

``The math is too hard to ignore,'' Mihelic said today in an interview. ``The next 12 to 18 months in my mind will be critical, and you have to be there, you have to be willing to play.''

Bank shares on the Standard & Poor's 500 Banks Index and Regional Banks Index have fallen about 50 percent in the past 12 months, and lenders may need to raise more capital after taking debt writedowns, Mihelic wrote in a 21-page note to investors.

That could present opportunities over the next 18 months for Royal Bank or Bank of Montreal, the fourth-biggest bank in Canada, the analyst said. He rates both bank stocks ``sector perform.''

Royal Bank, which has about 450 branches in five southern U.S. states, may look at banks such as Birmingham, Alabama-based Regions Financial and BB&T of Winston-Salem, North Carolina, Mihelic said. Royal Bank's U.S. base is in Raleigh, North Carolina.

``Royal is so well positioned: it has a premium multiple, the Canadian dollar is at par, it has a beachhead in the U.S. and frankly many of the local bidders won't be able to really bid,'' Mihelic said. ``You couldn't ask for a better setup.''

Stocks Down

BB&T, the 12th biggest U.S. bank by assets, fell 40 cents, or 1.5 percent, to $26.50 at 4:15 p.m. in New York Stock Exchange composite trading, for a market value of $14.5 billion. Regions rose 17 cents, or 1.3 percent, to $13.28. The stock has dropped 44 percent this year, and has a market value of $9.23 billion. Royal Bank rose 58 cents to C$49 in Toronto Stock Exchange trading. Bank of Montreal rose 40 cents to C$44.90.

Royal Bank, North America's fifth-biggest bank with a market value of $62.7 billion, doesn't comment on speculation or analysts' notes, spokeswoman Beja Rodeck said.

Royal Bank has spent more than C$2 billion on U.S. acquisitions in the past two years, including Atlanta-based Flag Financial Corp. and Alabama National BanCorporation. The bank also agreed to buy RBTT Financial Holdings Ltd. in Trinidad and Tobago for about $2.2 billion.

James Westlake, Royal Bank's head of U.S. and international banking, said in an April 11 interview that ``there's lots of room for growth without additional acquisitions.''

Harris Expansion

Possible deals for Bank of Montreal, which owns the Chicago-based Harris Bank, may include Associated Banc-Corp of Green Bay, Wisconsin, which is worth about $3.1 billion, or Huntington BancShares Inc., an Ohio bank worth $2.4 billion, the analyst said. Paul Deegan, a spokesman for Toronto-based Bank of Montreal, didn't immediately have a comment.

Bank of Montreal has spent about C$1.7 billion on U.S. consumer banks since 2000 to expand Harris. Harris Chief Executive Officer Ellen Costello said in April that the bank needed to grow through acquisitions and plans to take advantage of ``unprecedented'' opportunities during the market downturn.

Royal Bank could absorb an acquisition of as much as C$16 billion, and Bank of Montreal could handle a takeover worth up to C$5 billion, Mihelic said.

Regions Financial spokesman Tim Deighton said his bank doesn't comment on rumors or speculation. Cindy Moon-Mogush of Associated Banc-Corp. didn't return a phone call seeking comment. Huntington spokeswoman Jeri Grier and BB&T spokeswoman A.-C. McGraw declined to comment.

The Canadian banks may also look at buying stakes in the U.S. banks instead of acquisitions, Mihelic wrote.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net

Last Updated: June 13, 2008 16:35 EDT