so i will get to specifics.
I am a future optimist on PBCT, for the reasons specified in part 2 of my first email. Goldman sachs will be buying this bank in 2010, and the price will have to be about 1.5 to 2 times book to get it done, even in this environment. The dividend is safe, the stock will trade below book value, perhaps, due to the market uncertainty.
My negativity stemmed from the CEO. In case you dont know, he worked mostly in france, and i believe switzerland, and his US banking experience was out west. He knows VERY LITTLE about banking here in the Northeast, hence his Chittenden disaster. If you know nothing of Chittenden, it is a dumpy no growth, poor area bank in rhode island, western mass etc.......totally unattractive in every way, shape and form. It has cost more than it saved on the balance sheet, and even worse, the guy overpaid by a facor of 2.5x for the crumb bank itself.
Not to mention, deposit growth is negative, interest marging dropped 15 or so basis points, loan lossed MORE than doubled....
For the few who know anything about the CEO, he is a CFO, nothing else. He has no leadership skills, doesn't speak or write well at all, and has limited knowledge of the NE real estate or banking scene. The stocks performance has been horrible, 20 to near 15 after this earnings miss.
The earnings "miss" by a wide margin was from previously lowered estimates multiple times by the street concensus. They even feel short of my 12 cent calculation.
U must not feel the pain of most here that bought at 40PE's and $20 a share. Then you have no reason to be upset as they are.
PBCT is, and will continue to be punished by the overall state of the banking scene itself until conditions improve, regardless if they are immune or not to loan losses going forward.
But lets be honest, this management is patient, HOWEVER, look at the junk they buy when the actually use the capital.
Well capitalized means nothing, when you put the cash in 0% short term instruments like PBCT does. It still has no growth, whatsoever, and will continue to do so until it is either bought, or buys a growing bank is a nice area for once. They messed up once, and with the same brains in there, may very well mess up again.
I know PBCT is a long term buy, because of buyout prospect. I also know that as soon as the unused cash is put on the balance sheet as part of assets, the EPS has a shot of getting a near double, and therefore a new forward PE multiple that will help its valuation.
Carson was a former President of PBCT who did much good for the bank; as well as navigating it through the last major recession with a steady hand at the helm while other banks were dropping like flies. A visionary and class act.
The problem with PBCT boils down to a lack of leadership at the CEO level. Ever since Carson retired, the bank has not had a real leader. Klein, an attorney, was a back office beaurocrat who was afraid to take any risk. Instead he sold off assets and watched as frustrated key personnel go to the competition. Incredabley (and with the Boards approval) he stayed in office until his death instead of working on finding a capable successor. As a result the Board panicked and took the "safe" route by promoting the former CFO Sherringham who had no prior CEO experience. Sherringham has zero involvement in the communities that PBCT serves and has no relationship with the employees. He flies home every weekend to his home in CA. However, he does have a good working relationship with the analysts who he has somehow convinced that he is our there searching for aquisitions (and OJ is out looking for Nicole Simpson's killer!)
The best part is that Dave Carson recently joined Liberty Bank's Board (a CT based competitor of PBCT). Now explain to me why he is not on the PBCT Board?
As I said before, until the bank gets a real leader in the CEO's office, this bank will continue to flounder. Eight cents a share earnings, 76% efficiency ratio...what an embarrassment.
Please get your facts correct - Chittenden Bank is based out of Burlington VT - not Rhode Island. Chittenden Corp included 5 other banks in addition to Chittenden Bank they include Maine Bank & Trust Portland ME, Merrill Bank Bangor ME, Ocean Bank, NH, Bank of Western MA Springfield, MA, and Flagship Bank Worcester, MA. Dummpy, bad loans - NOT! When PBCT bought Chittenden, THEY increased loan reserves and down graded some credits because they are conservative and responsible bankers - unlike the greedy GIANT Banks who are mostly to blame for our current state of economy! In addition to Chittenden's strength, they also have/had an efficiency ratio that was the envy of the industry. PBCT is guilty only of being over cautious, taking too long to incorporate these banks under one name. Dummpy Bank - COME ON!
I never said where Chittenden was headquartered. And not that it matters since the issue here is PBCT management, strategy, and its value as an investment which I think continues to be favorable on a relative basis compared to its peer group (my reservations regarding managment's vision not withstanding).
Well... currently PBCT's efficiency ratio at 69% is certainly not the "envy of the industry." (69 cents of every dollar pays for overhead).
Also, I thought the Chittenden aquisition was going to be accretive to earnings. We've gone from approximately $1.00/share to less than .50 post acquisition?
Forget any other acquisitions until management shows us they can properly consolidate operations, etc. Up until now, management/Board seems too focused on rewarding themselves for doing nothing. The Board should have hired a real CEO not a CFO dressed in sheeps clothing.
IMHO nothing will change with this bloated beaurocracy called People's United Bank until the Board wakes up and gets a real leader to run the bank.
Optimism is great, but execution is all that matters now. I don't believe you have any reason or proof to show optimism in the way this exec team runs the cash hoard. Analysts are also not stupid, nor are fund holders.
Its not a great bank, its a well capitalized bank in a great zipcode, with a headquarters worth 150 million, fairfield county......etc
Even old execs do not like this new CEO, trust in that. Some of us know that well.
ALof of you dont seem to understand how HORRIBLE planned, executed, and calculated the first acquisition was. Its a disaster, every college grad can read a balance sheet.......its all there.
Potential is only good if it is met.
All of our best hope is that this bank is bought out, which i am certain it will, by GS.
Patience will pay off.......40% min return by 2010
You seem to know a lot about banking with your prodiction here.
Question to you is what do you think will happen with Webster Bank WBS.Think they will got bought up too.
Love to hear your thoughts on it.
Thanks for elaborating on your earlier posting. I agree that management is posturing itself for a buyout once the economy stabilizes and they can get an acceptable premium over book. I also concur that Sheringham is primarily a custodian looking at ways to squeeze profits from his employees and the customer base, rather than being a visionary looking to build a franchise for the long term. This is too bad. A more creative management team would be doing a better job of building this for the long haul which would generate optimal shareholder value. The opportunities are extraordinary given their surplus capital and the acute distress in the industry as a whole. That said, I will be happy if I can get a reasonable return off this stock from the dividend and ultimate gain off a sale down the line.