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10 Big Bank Stocks Gearing Up for Third-Quarter Earnings (Update 3)

6. First Niagara Financial Group
Shares of First Niagara Financial Group (FNFG) of Buffalo, N.Y., closed at $8.07 Friday, down 4% year-to-date, following a 35% decline during 2011.

The shares trade for 1.6 times tangible book value, and for 10.2 times the consensus 2013 EPS estimate of 79 cents. The consensus 2012 EPS estimate is 72 cents.

Based on a quarterly payout of eight cents, the shares have a dividend yield of 3.97%.

For 12 months through June 30, First Niagara's ROA was 0.47%, while the company's ROE was 3.38%.

The analyst consensus is for First Niagara to report third-quarter earnings of 18 cents, increasing from a five-cent loss during the second quarter, but down slightly from 19 cents during the third quarter of 2011.

During the second quarter, First Niagara completed its deal to acquire roughly 200 branches from HSBC (HBC), while divesting about 100 branches, leading to an $18.5 million net loss, including about $135 million in extraordinary expenses and restructuring charges.

Moving ahead, investors will be looking for significant efficiency improvements and organic growth initiatives, now that the complicated branch deal has been completed.

Deutsche Bank analyst Dave Rochester rates First Niagara a "Buy," with a $9.50 price target, saying last month that "we continue to expect the valuation differential between FNFG shares and the mid cap banks to shrink over time as earnings visibility and investor sentiment improve, driving solid upside over the next year, but we note much of this upside could take time to develop, and is largely predicated on management's ability to consistently hit guidance and deliver on its organic growth strategy."

The analyst added that "FNFG recently indicated it could begin to increase the dividend as early as next year. Although we would expect any potential hike in FY13 (if it were to occur) would likely be small and occur later in the year, it would still signal management's longer-term commitment to rebuilding this level."

FNFG Chart FNFG data by YCharts

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