Wednesday, January 12, 2011

Banks Are Getting Together Again

The banks are restless. They're merging again, which is good news for bank investors, but probably bad news for some bank employees. Layoffs and staff reductions will follow.

First Niagara's Path Could Be Game-Changer

NewAlliance Bancshares (NAL) * Top-Rated Company

Buffalo, N.Y.-based First Niagara Financial Group (FNFG) has made two moves that could be seen as potential game changers.

First, the company gained approval from the Federal Reserve Board in April to change its classification from a thrift holding company to a bank holding company.

This cleared the way for First Niagara Financial to more easily expand through acquisitions.

The second potential game changer is an acquisition that's expected to wrap up in April, pending regulatory approval. On Dec. 20, shareholders approved a plan for First Niagara Financial Group to buy Connecticut-based NewAlliance Bancshares (NAL).

The move will make First Niagara a top-25 bank by assets.

First Niagara has 257 branches in New York and Pennsylvania. The NewAlliance acquisition will add 88 branches in Connecticut and Massachusetts.

First Niagara has acquired three insurance subsidiaries since August and bought Pennsylvania-based Harleysville National in April.

First Niagara's share price is up 19% since the NewAlliance merger proposal was announced Aug. 19. It was the largest merger of U.S. lenders since October 2008, according to Bloomberg.

First Niagara cleared a 13.89 buy point in a double-bottom base Wednesday. But it hasn't yet found strong volume. The stock is about 3% past the potential buy point.

Earnings grew 29%, 175% and 229% in the past three quarters, according to Thomson First Call. Loan losses dropped about 27% in the most recent quarter.

First Niagara pays a quarterly dividend of 15 cents a share. The annualized dividend yield is 4.2%.

One negative is the Dodd-Frank Act. The law is increasing bank costs and limiting activities that banks choose to take on.

Labels: , ,


Anonymous Tiffany Jewelry said...

It is high time for a change. Would merger be a panacea for the banks?

8:18 PM  
Blogger no_slappz said...

tiffany jewelry,

Mergers are good news for banks and bank investors, but somewhat hazardous for employees who hold redundant positions.

One of the biggest headaches with merging banks is getting both institutions on the right accounting platform.

However, most mergers result in only a few branch closings. But the mergers reduce the need for CEOs and other top officers who are always the hightest paid people on the payroll.

In the case of First Niagara's (FNFG) takeover of NewAlliance (NAB), Peyton Patterson, the NAB CEO, is leaving.

Anyway, "panacea" is the wrong word. Mergers are good news because an increase in mergers means operating conditions are beginning to get better.

7:11 AM  

Post a Comment

<< Home