Staff Reports
Two credit rating agencies are saying the First Niagara Financial Group is favorable for investors.
Moody’s Investors Service and Standard & Poor’s stocks and bonds rating services gave First Niagara credit ratings of “Baa1” and “BBB-” respectively. The Baa1 rating is investment grade and considered medium credit risk under the Moody’s range, just below A, Aa and Aaa the highest rating. The Standard & Poor rating is also investment grade and medium risk, three levels away from the highest mark of AAA.
The ratings are the third major rating service to give First Niagara a favorable rating. In July 2009 First Niagara was given a “BBB” rating from Fitch Ratings. A high rating from all three agencies means a company can borrow money at little cost, which is something investors like to see.
John Koelmel, First Niagara president and chief executive officer, said the ratings were proof of the company’s success and growth over the past year. First Niagara is in a good position to compete in the years ahead, he said.
“It’s further affirmation of our solid and very strong position,” Koelmel said.
Standard & Poor’s report said First Niagara’s ratings “reflect the bank’s strong operating performance driven by low credit costs, solid liquidity and funding profile created by a growing deposit franchise; a good track record at integrating acquisitions in its upstate New York footprint; and an excellent capital base.” However the report did note that those strengths are offset by what it called aggressive growth; “potential integration risks associated with the bank’s decision to acquire Harleysville National Corp.; and a concentration of the loan portfolio in commercial real estate, a sector that is under significant credit pressures.”
“We expect the bank’s strong capital position to act as a buffer against potential future credit concerns as management continues to expand the bank’s geographic and business franchise,” the report concluded.
The Moody report agreed, saying First Niagara had “healthy and consistent financial fundamentals,” but also “integration challenges” with the expansion into Pennsylvania. First Niagara had bought banks in Pittsburgh and is in the process of buying Philadelphia-based Harleysville. That deal is expected to close next month.
Moody’s said it expected that First Niagara had a strong capital position and should be able to handle any unexpected costs from the purchases.
This is the first time First Niagara has been rated by either agency. To be rated a company must apply to the agencies, then go through an extensive process which started last fall. Koelmel said both Standard & Poor’s and Moody’s look at a company’s detailed financial data and meet with its officials. The agencies also keep up on companies that have been rated with periodic reports.
Having a favorable first rating is noteworthy for First Niagara, Koelmel said, especially since most banks and other financial institutions have been struggling.
“And we’re confident that our rating will rise,” he added.
The ratings come at a time of growth for First Niagara, which with the Pittsburgh and Philadelphia area purchases the company will surge to 254 branches and have its assets increase to $19.3 billion. Koelmel said the Harleysville acquisition is going well.
“We’re right on track,” Koelmel said.
Tuesday First Niagara also announced its 2009 fourth quarter earnings report would be released Jan. 21.
