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TheStreet Open House

First Niagara: Financial Winner

Stocks in this article: FNFGI:BKX

NEW YORK ( TheStreet) -- First Niagara (FNFG) was the winner among the largest U.S. financial names on Monday, with shares rising 6% to close at $7.60.

The broad indexes saw slight declines, as investors took a breather after last week's rally, after various eurozone leaders pledged to take strong action to defend the unified currency.

The KBW Bank Index (I:BKX) pulled back 1%, with 19 of the 24 index components showing declines for the session.

First Niagara's shares had declined 2% on Friday, after the Buffalo, N.Y., lender reported a second-quarter net loss to common shareholders of $18.5 million, or five cents a share, which included $135 million in expenses and restructuring charges tied to the company's acquisition of 100 branches from HSBC (HBC), after First Niagara completed divestitures of roughly 100 branches.

Excluding the merger and restructuring charges, First Niagara reported operating net income available to common shareholders of $59.1 million, or 17 cents a share, missing by a penny the consensus estimate among analysts polled by Thomson Reuters.

Jefferies analyst Casey Haire rates First Niagara a "Buy," but on Friday lowered his price target for the shares by 50 cents to $9.00, while also lowering his 2012 earnings estimate to 75 cents a share, from 87 cents, and his 2013 EPS estimate to 84 cents, from $1.01.

Haire said his estimate cut for 2013 reflected "a more conservative view on normalized loss rates (40bp) vs. management's guidance (30bp-35bp)," but added that because his firm's model now reflects "more conservative view on credit costs, we see little downside risk to our 2013 estimate with loans growing double-digits and premium amortization risk reduced."

Deutsche Bank analyst Dave Rochester also rates First Niagara a "Buy," saying Friday that his firm expects "investors to assign a discount to the shares versus peers given a relatively weaker capital position and the potential for future M&A, but we continue to expect the differential in valuation between the stock and the midcap banks to shrink over time, driving share outperformance."

Rochester also said that during the second quarter, First Niagara's "organic loan growth and NIM trends were better than expected, and expenses came in below our expectations, offsetting a higher provision and driving a $0.01 beat versus our core EPS figure."

The analyst's price target for First Niagara is $9.50, and he estimates the company will post operating earnings of 69 cents a share for all of 2012, followed by operating EPS of 80 cents a share in 2013.

First Niagara's shares have now declined 10% year-to-date, after declining 35% during 2011.

FNFG Chart FNFG data by YCharts

The shares trade for 1.4 times their reported June 30 tangible book value of $5.30, and for nine times the consensus 2013 EPS estimate of 83 cents. The consensus 2012 EPS estimate is 74 cents.

Based on a quarterly payout of eight cents, the shares have a dividend yield of 4.21%.

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

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