First Niagara knows that not all banks are alike

Posted Apr 27th 2009 11:30AM by Joseph Lazzaro
Filed under: Stocks to Buy

A bank stock? In this market? Indeed, opportunities exist, but you have to pick your battles, and First Niagara Financial Group (NASDAQ: FNFG) is one.

First Niagara is that best of all possible banks for the new era. A conglomerate? No. A bank of scale? No. It's a community bank, and it contains the golden goose of banking: few non-performing mortgages!

In general, analysts like FNFG's 114-branches, superior customer service, successful recent $361 million stock offering, and its solid, performing residential loan portfolio, which should enable the bank to pay off its TARP allocation relatively soon. The First Call F2009/F2010 EPS estimates for FNFG are 65 cents / 83 cents.

Other positives: average core deposits increased 7% in F2008, and core deposits now comprise 66% of total deposits, a more than 60% increase from F2007.

Stock Analysis: First Niagara is a moderate-risk stock. Consider buying a 25% position in FNFG now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your FNFG position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $6.20.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: banking stocks, BankingStocks, First Niagara Financial Corp., FNFG