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First Niagara Financial's CEO Discusses Securities Portfolio Repositioning Conference Call (Transcript)

Stocks in this article: FNFG

As Greg will explain, we’ve been evaluating the realities and unintended outcomes of that strategy during this year’s increasingly volatile environment. With the benefit of the review and analysis he will recap, we obviously concluded that it wasn’t beneficial to continue to carry the increasingly uncontrollable and very unpredictable risk associated with the portion of the MBS book we sold. That while still additive financially to our results and outcomes, those risks have become value-dilutive to the increasingly positive results and outcomes from a core business that’s performing better today than ever. So, in effect, we’ve significantly scaled back that bridging initiative now, rather than let it run its full course over the next couple years.

Do our actions reduce short-term earnings for the next couple of years? Sure, but that’s minimized by a combination of, one, the additional downside exposure that we believe would have materialized had we retained the entire portfolio, as well as, two, the benefits of the now improved asset sensitivity of the balance sheet.

More importantly, does it impact longer-term earnings growth and upside, not at all. Our lending team continues to perform at an industry-leading level and we’re fully confident about delivering on our improved opportunity to build our loan portfolio just as planned over the next few years.

Should our enhanced capital position against an even lower risk balance sheet better position shareholders for an improved valuation and return during these uncertain times, we believe it will. And at the heart of it for us, the market will now be able to focus fully and completely on the strength of our core business. And our execution continues to differentiate and distinguish versus peers and the sector at large. The latest evidence of that is in the early returns on the HSBC branch transaction just 40 days after closing. And I’ll give you a quick drive-by on that in a few minutes.

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