Thursday, September 20, 2018

Quality And Conservatism At People's United Comes At A Cost

There’s a lot to like about People’s United Financial (PBCT). A leading bank in New England (#4 in deposit share), People’s United services a client base with well above-average household income and has maintained excellent full-cycle credit quality versus its peers. The bank has also had solid success in expanding its lending franchise into the New York and Boston metro markets and has produced some good long-term C&I loan growth numbers. I’d also note that the bank pays a fairly attractive dividend and operates with a conservative financial structure.

There are also things that aren’t so good about People’s United, though, including the company’s persistent below-peer profitability and more limited growth prospects. Loan growth is looking more challenging in 2018 and the bank’s asset sensitivity may not be worth as much if we’re closer to the end of the rate cycle. People’s United has long underperformed regional banks as a group, and while I do see some value here, this is a tougher call given the more diminished growth prospects that I see.

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Quality And Conservatism At People's United Comes At A Cost

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