First Niagara's Guidance Disappoints


By Andrew R. Johnson

First Niagara Financial Group Inc.'s shares plummeted Friday after the Buffalo-based regional lender issued earnings guidance below analysts' expectations.

The bank, which has expanded through a series of acquisitions in recent years, unveiled plans to overhaul its technology systems, which executives said would enable the company to improve its efficiency and lower costs in the long run.

President and Chief Executive Gary Crosby said that project as well as other efforts to boost the bank's fee income will cost the bank between $200 million and $250 million over the next three to four years. The bank earlier this month announced plans to ramp up its investments in online and mobile technology and reduce employee head count in its branches.

First Niagara expects operating earnings for the year in the range of 72 cents to 75 cents a share, below the current analyst estimate of 79 cents, according to Thomson Reuters.

Shares of First Niagara fell nearly 12% Friday and were trading down 9.9% at $9.32 in recent trading. The shares are up more than 18% over this past year.

It is "highly unusual" for a regional bank of First Niagara's size, with $38 billion in assets, to undertake a complete overhaul of its technology systems, said David Darst, an analyst with Guggenheim Securities. The bank's acquisitions in recent years, including its 2011 deal to buy nearly 200 branches from HSBC Holdings PLC's U.S. bank, has resulted in the company operating a patchwork of technology systems.

The company's plan is a "realization that banking is being done differently and that regional banks, if they want to continue to grow and gain market share," need to revamp their infrastructure.

First Niagara's results for the fourth quarter were "solid," analysts at Sandler O'Neill + Partners, wrote in research note Friday.

The company's profit rose 27% to $77.7 million. On a per-share basis, the company earned 20 cents, up from 15 cents a year earlier. The year-earlier quarter included charges related to its portfolio of collateralized mortgage obligations and restructuring expenses.

Revenue increased 7.4% to $369.6 million.

Analysts polled by Thomson Reuters were expecting the company to earn 20 cents a share with $363.5 million in revenue.

Write to Andrew R. Johnson at andrewr.johnson@wsj.com

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Corrections & Amplifications

This was corrected at 1:32 p.m. ET because the original misspelled the company's name in the headline.

This was corrected at 1:32 p.m. ET because the original misstated the time frame for the more than 18% gain in the share price in the fifth paragraph. The gain is over the past year, not year-to-date.

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