With a new tagline on billboards and a swath of new signs to come in New York supermarkets, People”™s United Financial Inc. had its highest-ever profit at $58.6 million in the first quarter.
During the quarter, People”™s United unveiled a new slogan: “What know-how can do.” It is about to find out in New York, where the Bridgeport-based bank is rapidly building up its commercial lending staff in Westchester County, N.Y., even as it takes over branches in Stop & Shop supermarkets there run by RBS Citizens Bank. The company continues also to assimilate Bank of Smithtown ”“ since acquiring the Long Island bank, People”™s United has charged off $111 million in loans.
“We”™ve been working the Westchester market from Connecticut for a number of years, and now we have people on the ground there,” CEO Jack Barnes said in a conference call with investment analysts. “We”™ve recently hired several more people in the commercial real estate market, lined up with (metropolitan) New York ”¦ So we are, as we”™ve indicated, putting a lot of focus there and continuing to build our teams and efforts out.”
The Stop & Shop branches are key to the banks retail lending efforts and also play a significant role in small business lending, according to CFO Kirk Walters. The overall cost of operating an in-store branch is a third less than a traditional branch.
“We do get a nice chunk of loan volume through those branches,” Walters said. “Almost 30 percent of business banking loans come through those branches ”¦ When we open the in-stores, (we see) a lift with our business banking in the small end of middle market commercial because we”™re open seven days a week and it”™s very convenient for them.”
Even as it continues to jettison jobs under Barnes, People”™s United plowed the vast bulk of what it earned in the first quarter into repurchasing shares of its own stock. The $56 million failed to move the needle on People”™s United shares (Nasdaq: PBCT), which gained 13 cents over three months to close at $13.23 per share, before tailing back off in April.
Other regional banks similarly have seen their shares tread water or languish in value during the first quarter, including Buffalo, N.Y.-based First Niagara Financial Group Inc. and Waterbury-based Webster Financial Inc.
First Niagara is wrapping up the acquisition of HSBC branches in the Northeast, including several in Fairfield County.
“We, like everyone else, are putting on ”¦ loans and securities at yields and spreads that are dilutive to (net interest margin),” said Greg Norwood, CFO of First Niagara, in a conference call. “That”™s not a bad thing ”“ it”™s the old ”˜volume-versus-rate”™ play, and as long as we keep making new profitable loans and continue to engage our customers, we feel good about that.”
During his own conference call, Webster Bank CEO James Smith said his company has been working to hold up its pricing, particularly on commercial loans.
“That is not a fluke,” Smith said. “Every one of these new relationships that we”™re putting on is getting scrubbed in terms of what is the economic profit that will generate from the relationship, and … it”™s a tougher hurdle ”¦ You”™ll find the same thing on the consumer side, particularly as regards to jumbo mortgage lending.”
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