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People's United (PBCT) Poised for Growth: Should You Hold?

Zacks Equity Research

Consecutive Fed rate hikes, along with the recent approval of Financial Choice Act, have led banking stocks to rally. People's United Financial, Inc. PBCT is one such stock. Though the company recorded escalating expenses and margin pressure over the past few years, it has been growing through acquisitions.

Opportunistic acquisitions, improvement in asset quality and strong loans, and deposits balances have aided the company in surging 23.7% in the last one year compared with 32.7% growth recorded by the Zacks categorized Savings & Loan industry.

Further, the company’s earnings estimates remained unchanged for 2017 and 2018, over the last 60 days. As a result, it carries a Zacks Rank #3 (Hold).

In line with its strategy to boost fee income businesses, the company completed the acquisition of Gerstein Fisher, a $3-billion, New York-based investment management firm, in Nov 2016. Previously, in Jun 2016, it had inked a $391-million all-stock deal to acquire Riverhead-based Suffolk Bancorp, which would fortify its footprint in the New York metro region. Both the transactions are likely to be accretive to earnings.

Further, driven by a robust capital position, the company remains committed to enhance shareholders’ value. In Apr 2017, it raised its quarterly dividend to 17.25 cents per share, marking the 24th consecutive annual dividend hike.

Moreover, anticipated lesser regulations on lending and capital levels will aid profitability which was adversely affected due to costs of compliance related to strict regulations over the past few years.

However, despite undertaking a number of expense-saving initiatives, People’s United’s elevated operating expenses remain a headwind. Though the company is focused on optimizing its branch network and initiated installation of technology to improve efficiencies and reduce costs, high expense levels are likely to limit bottom-line expansion.

Stocks to Consider

BOK Financial Corporation BOKF has been witnessing upward estimate revisions for the last 60 days. Over the last one year, the company’s share price has been up more than 44%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comerica Incorporated CMA has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock soared nearly 86.9%, over the past one year. It currently has a Zacks Rank #2.

BancFirst Corporation BANF has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 69.7%, over the last one year. It holds a Zacks Rank #2, at present.

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