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First Niagara: Capital One Deal Winner (Update 1)

Stocks in this article: BAC KEY COF FNFG HBC ING CBU FISI

Updated with market close information.

NEW YORK ( TheStreet) -- First Niagara Financial Group (FNFG) was the winner among the largest U.S. banking names on Wednesday, with rising 3% to close at $9.77.

First Niagara is awaiting regulatory approval for its deal to purchase roughly 200 branches from HSBC (HBC), and the Buffalo, N.Y., lender's shares jumped after the Federal Reserve late Tuesday announced its long-delayed approval of Capital One's (COF) $9 billion deal to purchase ING Direct (USA) from ING Groep (ING).

The broad indexes pull back as eurozone leaders made additional demands on Greece before a possible agreement on a second bailout for roughly $170 billion. Meanwhile Greece's creditors canceled a meeting originally scheduled for Wednesday in Brussels because of lack of assurance on whether Greece will follow through on the government austerity program it passed over the weekend.

The KBW Bank Index (I:BKX) was down slightly to close at 44.20, with the 24 index components roughly split between winners and losers.

First Niagara's shares have now returned 14% year to date. The company is in the midst of a huge transition, with agreements to divest roughly 100 branches, in order to trim overlapping offices and also to address Justice Department concerns over competitive balance in the company's market area.

The company has made deals to sell branches to Community Bank System (CBU), of DeWitt, N.Y., Financial Institiutions, Inc. (FISI) of Warsaw, N.Y., and KeyCorp (KEY) of Cleveland, although the HSBC deal is still subject to regulatory approval.

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First Niagara's shares trade for 1.3 times tangible book value, according to HighlineFI, and for 10 times the consensus 2012 EPS estimate of 87 cents.

Deutsche Bank analyst Dave Rochester rates First Niagara a "Buy," with a $12 price target, and said late last month that "With the branch divestitures behind the company, and a solid, well communicated, commitment to organic growth over the next 18-24 month, we expect continued execution on market share expansion in the commercial arena will improve sentiment further, driving trading multiples to levels more in-line with the industry."

Rochester looks for the shares to eventually trade for 14 times forward earnings. The analyst estimates that First Niagara will earn 90 cents a share this year, followed by EPS of $1.10 in 2013.

Interested in more on First Niagara Financial Group? See TheStreet Ratings' report card for this stock.

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