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Morgan Stanley Reiterates Overweight on Wachovia

Wachovia (WB) agreed to acquire SouthTrust (SOTR) in a stock deal valued at about $14.3 billion, or $41.83 per share. Morgan Stanley reiterated an overweight rating on Wachovia shares.

Analyst Betsy Graseck says the deal metrics at first glance look rich. However, SouthTrust comes with $1.2 billion in excess capital. She says SouthTrust gives Wachovia access to fast growing markets in Texas and Florida. She expects Wachovia will be able to drive revenue growth in SouthTrust's client base with its broader product set, particularly in asset management and wealth management.

Graseck anticipates Wachovia to grow earnings faster than the median expected growth rate for large cap bank group. She says analysis suggest Wachovia's share price does not reflect attractive growth profile. She recommends purchase on weakness.

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