First Niagara Financial Group Inc. (FNFG)

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First Niagara Financial Group Inc. (FNFG)

Q4 2012 Earnings Call

January 23, 2013 8:30 am ET


John Koelmel – President, Chief Executive Officer

Greg Norwood – Chief Financial Officer

Ram Shankar – Director, Investor Relations


Dave Rochester – Deutsche Bank

Erika Penala – Bank of America Merrill Lynch

John Pancari – Evercore Partners

Josh Levin – Citigroup

Casey Haire – Jefferies

Tom – FBR Capital Markets

Damon Delmonte – KBW

Matt Kelley – Sterne Agee

Collyn Gilbert – Stifel Nicolaus

Theodore Kovalac (sp) – Informed Sources Service Group

David Darst – Guggenheim Securities

Tom Alonso – Macquarie



Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask your question, you may press star, one. This call is being recorded. If you have any objections, you may disconnect at this point.

I will turn the meeting over to your host, Mr. Ram Shankar. Sir, you may proceed.

Ram Shankar

Thank you and good morning everyone. Thank you for joining me this morning. With me today are John Koelmel, President and CEO, and Greg Norwood, our Chief Financial Officer.

Before we begin, this presentation contains forward-looking information for First Niagara Financial Group. Such information constitutes forward-looking statements which involve significant risks and uncertainties. Actual results may differ materially from the results discussed on these forward-looking statements.

With that, let me turn the call over to John. John?

John Koelmel

Thank you, Ram, and good morning everyone. 2012 – it finished a challenging 18 months for us during which we completed the HSBC branch transaction, repositioned our balance sheet, and otherwise navigated a very dynamic external environment. But with all of that now behind us, we start the year in a much better position than where we were just 12 short months ago. This time, with a simpler and sharper focus than in any time in my tenure, solely on effectively and efficiently running the business we have today to again create real value for shareholders. We’ve obviously been challenged to do just that for the last year and a half, and therefore our focus in 2013 is to deliver consistent and predictable performance in outcomes and see that in turn translate to increased shareholder value. To do that, by continuing to be forward-looking to ensure we most effectively navigate the challenging economic, regulatory and political environment but be very focused on the present and execute with the discipline needed to make more clear this year the real value of the business we have built over the last four years.

Clear away all the clutter of the HSBC transaction and the balance sheet repositioning, you see that our results in 2012, the last six months in particular, make evident that we have a very well positioned franchise with a terrific brand, a fabulous team, and very positive momentum across all business lines and in every market we serve. We’ve already started 2013 with a clear resolve to build on that momentum and deliver a solid operating performance.

I realize the continuing clutter is a distraction we can’t perpetuate. I’ve done all I can to make clear throughout the last year that we look ahead with only one focus – running the business we have today. I understand that continuing noise, such as last week’s announcement about our outsized securities book and CMO portfolio in particular perpetuates questions about our ability to manage the balance sheet, to anticipate what will happen next, as well as to take the right actions to minimize any additional downside exposure until the economic and rate environment stabilizes. I’m confident we’ve now done just that relative to the CMO book, albeit with the pain of six more months of reality. I’ve again provided full transparency as to our expected outcomes for that portfolio and its anticipated future financial impacts.

The business momentum that we continued to build as we ended 2012 is evidenced by the new customer acquisition trends across all of our markets, along with deepening relationships, in particular with our best customers, as well as the improved execution in delivering all of our products and services as we more fully leverage our teammates, systems, processes, and infrastructure to facilitate efficient customer sales and service. While we can’t control what happens around us and while forecasting future events, given today’s realities, are challenging for everyone, our sole focus is to better bring the benefits of those continuing improvements in execution, effectiveness and efficiency to the bottom line.

So looking ahead, what can you expect from us this year, 2013? We presented the key elements of our refreshed business model at our last two conference appearances – no dramatic right or left turn, continue to keep it simple, maintain a constant eye on the customer, make it simple, easy, fast and very satisfying to do business with us. More specifically, accelerate the balance sheet rotation with disciplined loan growth that improves our earning asset mix, be smart in doing that to maintain our top quartile credit performance, increase relationship profitability by deepening share of wallet, and more effectively delivering our full array of fee-based products and services to our best customers; and be very disciplined in managing and controlling costs and the continuing investments we make to ensure we deliver more efficient results and outcomes.

The sum of that will create positive operating leverage and with that progressively improve returns, better than 1% ROA returns over the next several years. As I said earlier, we’ll do all of that with an increased sense of pace and urgency to deliver steady, consistent, positive results and performance to make clear we are in fact capable and proven operators.

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