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People's United falls after 3Q results miss Street

NEW YORK (AP) -- Shares of People's United Financial dropped Friday after the regional banking company's third-quarter performance missed analysts' expectations.

THE SPARK: For the three months ended Sept. 30, People's United Financial Inc. earned $58.5 million, or 19 cents per share. A year earlier it earned $62.2 million, or 18 cents per share.

Revenue fell to $311.8 million from $319.2 million.

Analysts polled by FactSet expected earnings of 21 cents per share on revenue of $311.9 million.

Net interest income fell to $223.5 million from $234.8 million. Net interest income combines interest on loans that a bank collects and interest on deposits and debt that a bank pays out. It is a measure of a bank's ability to profit from its lending.

Noninterest income, which includes fees, insurance and gains on securities, increased to $84 million from $81.4 million.

THE ANALYSIS: Rick Weiss of Boenning & Scattergood said in a client note that People's United had a disappointing quarter because of slowing loan growth and pressure on its margins. The analyst said he believes that earnings growth may be hard to achieve in the near term, in part due to a tough lending environment and difficulty lowering expenses.

Weiss reaffirmed an "Underperform" rating and $13.50 price target.

Sterne, Agee & Leach's Matthew Kelly believes that People's United will need to be more aggressive with its cost cutting if it wants to reach its goal of lowering its efficiency ratio to 55 percent by 2014's end. That ratio was 63.6 percent in the most recent quarter, with Kelly saying he doesn't think it will go much lower than that in the next two years.

The analyst maintained a "Neutral" rating.

SHARE ACTION: Down 68 cents, or 4.5 percent, to $14.39 in afternoon trading. The stock is up 19 percent for the year to date.