Conservatism And Active M&A Remain Issues At People's United

The word lackluster doesn’t really do justice to the frustrating performance from People’s United Financial (PBCT) over the past decade, as the negative return dramatically lags regional bank indices at individual comps like Signature (SBNY) and M&T Bank (MTB), though BankUnited (BKU) and New York Community (NYCB) do have similarly dreary long-term returns.

The problem, I believe, is an ongoing conservatism on the part of management, which depresses yields and profits, and an ongoing willingness to make TBV-dilutive transactions; over the past decade, People’s United has seen 2% annualized contraction in tangible book value per share, while its Northeast peers have grown TBV/yr at a rate of around 5% to 6% on average.

The bull argument is that all of these acquisitions will eventually produce value through scale and improved growth opportunities across a bigger footprint, not to mention the idea that the company’s conservatism will show its merits when the cycle turns sour. I can appreciate a good conservative story (like Commerce Bancshares (OTC:CBSH) ), but with People’s United not looking all that cheap, I can’t say I find the shares all that exciting.

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Conservatism And Active M&A Remain Issues At People's United