On Feb 26, we reiterated our Neutral recommendation on People's United Financial Inc. (PBCT), based on its prudent expense management and healthy capital deployment activites. However, lower revenue as a result of lower net interest income and unsettling macro economic issues remain the major concerns. Moreover, People’s United – a bank holding company – retains a Zacks Rank #3 (Hold).
People’s United’s fourth quarter 2012 earnings came in at 19 cents per share, in line with the Zacks Consensus Estimate. Total revenues, net of expense reported was $309.4 million in the quarter, down 0.6% year over year due to lower net interest income, partially offset by higher non-interest income.
Moreover, over the last 60 days, the Zacks Consensus Estimate for both 2013 and 2014 went down by a penny. However, with the expense reduction initiatives the company targets to reach efficiency ratio of 55% in late-2014. We expect such measures to help improve the company’s bottom line in the upcoming quarters.
Further, opportunistic acquisitions as well as robust inorganic growth has helped the company sustain the Neutral recommendation. Extensive capital deployment activities also continue to reinforce investors’ confidence in the stock.
However, the low interest rate environment and changing regulatory landscape are expected to undermine its revenue growth in the subsequent quarters. Further, given the sluggish market recovery, we expect the significant disruption and volatility caused in the financial markets to challenge margins in the foreseeable future.
Other Stocks to Consider
Other banking stocks that are currently performing well include First Defiance Financial Corp. (FDEF), First Financial Holdings Inc. (FFCH) and Meta Financial Group, Inc. (CASH). All these companies carry a Zacks Rank #1 (Strong Buy).
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