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.
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