With the global financial crisis having wrecked havoc amongst banks and financial services firms resulting in many of the weaker and less well capitalized players being weeded out, investors have been wary of the sector as a whole.
One company which has seen its reputation enhanced however is First Niagara (FNFG) which provides a host of financial services including banking and insurance offerings to the small business, retail and commercial sectors.
Founded in 1870 as Farmers and Mechanics Savings Bank and operated as Lockport Savings Bank until 2001 when it became First Niagara (FNFG), the company has an enviable track record in the US having delivered a superior investment return to its banking peers over the last decade. The company also enjoys investment -grade credit ratings from Standard & Poor’s, Moody’s Investors Service and Fitch.
At the start of the year the group had 172 branches spread around New York and Pennsylvania.
This branch infrastructure was further developed during the year following the acquisition of 57 National City branches in western Pennsylvania and Harleysville National Corporation. That leaves the company with $20 billion in assets, 254 branches and $14 billion in deposits.
While it trades on a generous forward price to earnings multiple of nearly 16 times earnings the company still offers investors a 4% dividend yield, a healthy return considering the muted economic outlook.
Reporting earnings recently, the company delivered record operating earnings for the quarter ended 30 June 2010. "Our progress continues with another strong quarterly performance," President and CEO John R. Koelmel said. "We are delivering across the board – strategically, operationally, and financially – as we are getting the job done for all our constituencies. We had a near flawless integration of our recent Eastern Pennsylvania acquisition, and results to date in both of our new Pennsylvania markets have surpassed expectations with very high retention rates and robust new customer generation. Coupled with the solid organic growth in our Upstate New York franchise, our game plan of playing offense continues to be very effective. Our aggressive branding and community involvement efforts are also bringing us terrific visibility and market response."
For the quarter, First Niagara (FNFG) delivered net income of $44.9 mllion or $0.22 per diluted share with retail deposits for the quarter increasing by $208 million or 14%.
While the Dodd-Frank Wall Street Reform and Consumer Protection Acts are likely to change the operating environment for financial services firms and lenders, the well established track record of First Niagara (FNFG) and its 140 year trading history indicate a company which has been well managed in the past. This track record coupled with the solid dividend yield provide investors with a solid dividend stock to consider for their portfolios.
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