First Niagara Financial (FNFG) and People's United Financial (PBCT) are pleased to be among the regional banks that generated loan growth during the third quarter, though the institutions wish they could get paid more for those loans.
The companies reported double-digit increases in loans from a year earlier. First Niagara, in Buffalo, N.Y., reported a 101% rise from the third quarter of 2012, while People's United, in Bridgeport, Conn., had a 10.4% spike.
At First Niagara, its growth was led by its dealings in indirect auto lending and commercial loans, Gregory Norwood, the $37 billion-asset company's chief financial officer, said in an interview. Those segments should continue grow at about the same rate this quarter, he said.
"We continue to have a strong pipeline and that allows us to look at a lot of deals," Norwood said.
Loan growth at People's United was a product of "leveraging our expanded footprint, as well as progress in our heritage markets and [a] strengthened product lineup," Kirk Walters, the $32 billion-asset company's chief financial officer, said during a conference call Thursday The company bought Danversbank in July 2011, giving it 24 branches around Boston.
People's United should see loan growth at similar rates during the fourth quarter, mostly from commercial and multifamily residential real estate, Jack Barnes, the company's president and chief executive, said during the call.
Borrowers' appetite for new loans has been mixed across the country, as uncertainty about the economy lingers. Heightened competition has stymied banks' abilities to turn originations into meaningful net interest income improvement.
A few regional banks have reported steady loan demand in the third quarter. KeyCorp (KEY) in Cleveland and PNC Financial Services Group (PNC) in Pittsburgh reported year-over-year loan growth of at least 5%. First Republic Bank (FRC) in San Francisco said loan demand was brisk, as its loans grew 22% from a year earlier, to $32.3 billion.
Other banks were much more subdued about their growth prospects. Loans rose nominally at BB&T (BBT) in Winston-Salem, N.C., and Fifth Third Bancorp (FITB) in Cincinnati. Kelly King, BB&T's chairman and chief executive, said during a conference call on Thursday that, "I don't think you could get 3% or 4% [loan growth] in the market."
First Niagara and People's United were stung by shrinking net interest margins. The margin at First Niagara shrank by 14 basis points from a year earlier, to 3.4%. At People's United, the margin compressed by 59 basis points from the third quarter of 2012, to 3.3%
Margins tightened because of intense competition. Some banks are too generous with pricing and terms, and Norwood said those factors are pinching everyone's margins. There were "deals we decided we didn't want to participate in, or deals that didn't have the pricing that we thought was reasonable," he said.
Separately, First Niagara said it is continuing to search for a permanent successor for former CEO John Koelmel, who departed in March. First Niagara is moving "as quickly as reasonably possible" but does not have a "specific deadline" for making a decision, Gary Crosby, the company's interim president and CEO, said during a Friday conference call.