If PBCT uses the money to buy back 3 billion that would result in a market cap of 1.8 billion dollars and only 140 million shares will be outstanding. The dividend payment of 86 million will be under the earnings of 92 million(low because fo the economy).
Buy back would be the best investment of shareholder wealth at this price. Buying another bank would dilute share holder value.
That would be the dumbest thing mgmt could do... If the want to dump some cash give it to the shareholders...issue a $4.00 special dividend and then they still would have about $1.5 billion in the piggy bank for reserves, acquisitions, etc...
Option 1: do a buy-back and the stock jumps maybe 5%...and it's lucky to hold the gains over the next 30 days.
Option 2: issue a $4 special dividend and watch the share price double, then maybe give back 10-20% over the next 30 days...meanwhile thrilling long investors and increasing PBCTs market cap significantly so that they can use their stock for future acquisitions and continue to keep the $1.5 billion in the kitty.
I would take a billion dollars and buy back shares at these levels. They will have 43 million in savings from the 70 million shares taken out of the float.
They should be able to deliver .70 cents in earnings on the remaining 300 million shares outstanding. That would be a 19 P/E ratio at current price levels.
They're not going to find a bank to acquire cheaper than their own shares at these levels. If I was the board I would speaking with investment firms on the options to take the company private at these levels and then IPO the shares again when the market turns around.
Net Tangible Book is 3.7 billion. That means the stock is trading only at 1 billion over net tangible book. Banks are being taken out at 2x net tangible book or 7.2 billion in People's case $20-22 a share.
Peoples is sitting on a ton of cash and liquidity with tier one capital ratio of about 26%!! Their assets are simply not being deployed profitably. Regional banks can make money even under the new regulations and Peoples should be actively seeking good acquisitions or effective mergers to improve profitability.
The synergies that could be achieved by a merger or acuisition with a similar sized commercial bank are incalculable! That's the road the new CEO should be going down.