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10 Bank Stocks You Need to Watch During Earnings Season (Update 1)

5. First Niagara Financial Group
Shares of First Niagara Financial Group (ZION) of Buffalo, N.Y., closed at $7.65 Friday, down 10% year-to-date, following a 35% decline during 2011.

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Based on a quarterly payout of eight cents, the shares have a dividend yield of 4.18%.

The shares trade just below tangible book value, and for 8.9 times the consensus 2013 EPS estimate of 86 cents. The consensus 2012 EPS estimate is 76 cents.

The company on Wednesday announced that it had "taken steps to reposition its securities portfolio through the sale of $3.1 billion of mortgage-backed securities (MBS), the proceeds of which were used to repay a comparable amount of short-term debt." First Niagara also said that there were no prepayment penalties on the debt repayments, and that the company would "recognize a $16 million pre-tax gain from the sale of securities in the second quarter of 2012."

Analysts expect First Niagara to report second-quarter operating earnings of 18 cents a share, compared to operating earnings of 19 cents a share in the first quarter, and 24 cents in the second quarter of 2011.

Jefferies analyst Casey Haire on Thursday said Haire on Thursday reiterated his "Buy" rating for First Niagara, while lowering his 12-month price target for the shares by two dollars to $9.50, lowering his second-quarter EPS estimate by three cents to 18 cents. The analyst also reduced his 2012 EPS estimate to 76 cents from 90 cents and his 2013 estimate to 85 cents from $1.03.

Taking the long view, the analyst said that the "restructuring gives up some earnings power, but also reduces premium amortization risk and provides much-needed clarity to earnings stream, which should win the stock back some multiple." The added "clarity/predictability of the EPS forecast could be the catalyst for long-awaited multiple expansion. Applying a discounted P/E multiple (11x vs. 12x peer avg.) and factoring in a 4% dividend yield, puts upside at over 20% from here," according to Haire.

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