On Tuesday, the regional bank,
People's United Financial, Inc.
's (
PBCT
), came up with an expansion plan in the New York State. The bank
is increasing its footprints in New York with the acquisition of 56
branches from Citizens Financial Group Inc. The deal is valued at
$3.25 million.
Besides buying 56 Citizen branches, People's United will take
over $325 million worth of deposits related to these branches.
Alongside, the company would be paying 1% premium to Citizens on
the deposits acquired. The agreement is expected to be completed in
the second quarter of 2012, subject to certain customary closing
conditions, which also include regulatory approvals.
The all-cash deal includes acquisition of all the existing
Citizens Bank branches in Long Island and New York City along with
certain branches in New York State's Westchester, Rockland, Putnam,
Orange, Dutchess and Ulster Counties.
Of the total, 52 branches are located in Stop & Shop
supermarkets and 4 are traditional branches. Currently, People's
United is operating 87 Stop & Shop branch locations in
Connecticut. The bank has decided to offer equivalent positions at
People's United to all the employees working at the acquired
Citizens branches.
Jefferies & Company Inc., the primary operating subsidiary
of
Jefferies Group Inc.
(
JEF
) acted as financial advisor to People's United. On the other hand,
Keefe, Bruyette & Woods Inc., a subsidiary of
KBW In.
(
KBW
), advised Citizens on the same.
Jack Barnes, President and Chief Executive Officer of People's
United, considers that the acquisition would increase the foothold
of bank for providing in-store banking services to customers on
Long Island and in Westchester County. Moreover, People's United is
the exclusive provider of banking services, getting the chance to
work for 139 Stop & Shop stores across Long Island, southern
New York State and Connecticut.
People's United has established a strong relationship with about
2.7 million shoppers at Stop & Shop locations through in-store
banking services. The bank provides full branch network and supreme
convenience as well as wide range of products and services to them.
At current level, People's United is serving customers at 37
traditional branch locations in Long Island and Westchester
County.
Moreover, the addition of new branches provides the bank with
further scope for core deposit funding. Therefore, increase in
deposits in the acquired branches will provide additional funding
for strong loan growth.
Alternatively, Stop & Shop considers its future relationship
with People's United to be opportunistic. The company
believes that partnering with People's United would provide
synergies of more convenience and volume to customers as they can
work on banking related matters along with shopping.
Our Take
Since last two years, People's United is continuing to be on an
acquisition spree. In 2010, the bank completed the acquisitions of
Smithtown Bancorp Inc. and LSB Corporation. These acquisitions
extended the company's presence in New England and New York State
and were accretive to the company's 2011 earnings.
Further, People's United's acquisition of Danvers Bancorp Inc.
in 2011 built a platform of growth for the company and made
People's United New England's largest independent bank as well as
the seventh largest bank, both in Massachusetts and Boston MSA.
Overall, People's United is trying to overcome the challenging
economic environment through opportunistic acquisitions and cost
reduction initiatives. The acquisitions reflect its strong capital
and liquidity position. Going forward, growth in loans and deposits
are expected to boost the company's financial results. However,
recent regulatory issues and economic weakness might act as
headwinds.
People's United currently retains its Zacks #3 Rank, which
translates into a short-term 'Hold' rating. Considering the
fundamentals, we also maintain our 'Neutral' recommendation on the
stock.
JEFFERIES GP-NW (
JEF
): Free Stock Analysis Report
KBW INC (
KBW
): Free Stock Analysis Report
PEOPLES UTD FIN (
PBCT
): Free Stock Analysis Report
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