First Niagara: Capital One Deal Winner (Update 1)

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.

Capital One's shares rose 2.5% to close at $49.18. After the Federal Reserve approved the ING deal late Tuesday, Capital One said it expected to close the deal "within the next few days."

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The Federal reserve said that in approving the ING deal, it had also considered Capital One's subsequent agreement to purchase HSBC's ( HBC) $30 billion U.S. credit card portfolio, including Capital One's plan to issue common shares to partially fund the $2.6 billion purchase.

That sets the stage for approval of the HSBC card deal by the Office of the Comptroller of the Currency, which is the lead regulator for Capital One's main banking subsidiary, Capital One, NA.

Capital One's shares have now returned 16% year-to-date. The shares trade for 1.4 times tangible book value according to HighlineFI, and for eight times the consensus 2012 earnings estimate of $5.84, among analysts polled by Thomson Reuters.

Interested in more on Capital One? See TheStreet Ratings' report card for this stock.

Wednesday's bank stock loser was Bank of America ( BAC), with shares declining 3% to close at $7.77, after Sanford Bernstein analyst John McDonald cut his rating on the shares to "Market Perform" from "Outperform."

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Bank of America's shares have returned 40% year-to-date, after falling 58% last year.

The shares trade for 0.7 times tangible book value, according to HighlineFI, and for 11 times the consensus 2012 earnings estimate of 71 cents.

McDonald's price target for Bank of America is $9.00. The analyst downgraded the shares "after a strong YTD rally appears to have taken capital raise fears out of the stock" and while he continues to see long-term upside for the shares, he believes "it will take time for BAC's earnings power to recover amid low interest rates, loan runoff, and a long tail to elevated mortgage-related expenses.

McDonald estimates that Bank of America will earn 65 cents a share in 2012, followed by EPS of $1.15 in 2013.

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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