Updated: December 6, 2011 10:37PM
Dear Mr. Berko: My friend, who is a reputable lawyer, recommended First Niagara Financial, which trades at $8.40 and pays a good dividend. I think buying 1,000 shares for a two- or three-year investment would be a good speculation. What do you think?
My friend also told me that the Federal Reserve in the past three years has lent over $10 trillion to Merrill Lynch, Goldman Sachs, Morgan Stanley and foreign banks at 1 percent interest and that none of this money has even been paid back. Could this possibly be true?
DS: Syracuse, N.Y.
Dear DS: No, that’s not true. The accurate number is $16.3 trillion, and the interest rate is zero. Bernanke and the administration are doing their darndest to hide this chicanery, but a recent Government Accountability Office audit showed that the Fed, without the knowledge of Congress and under the direction of the administration, gave Citigroup $2.5 trillion; gave Morgan Stanley $2.1 trillion; gave Merrill Lynch $2.0 trillion; gave Bank of America $1.3 trillion; and gave lesser amounts to Barclays, Deutsche Bank, UBS, The Royal Bank of Scotland, plus others. The complete list can be found on page 131 of the GAO audit.
This is an administration Ponzi scheme in which the Fed silently passed out money like Halloween candy to megabanks and super-corporations while millions of Americans were unemployed and couldn’t make mortgage payments. So far, not a centime has been repaid — and it will never be. Wouldn’t it be wonderful if we could trust our government?
But you can trust First Niagara Financial (FNFG-$9.29), a Buffalo, N.Y., bank that has been lending money to Americans since 1870. In 1870 our National Debt was $2.5 billion, the U.S. population was 40 million, J.D. Rockefeller incorporated Standard Oil of New Jersey and construction began on the Brooklyn Bridge. And today FNFG has 115 branches in upstate New York; 142 branches in Pennsylvania; a book value of $14.11; more than $1.2 billion in revenues; 99 cents a share in earnings; and a 64-cent dividend yielding a keen 7.9 percent. I think your lawyer friend gave you reputable advice.
Barclays, Market Edge and Reuters have a “buy” rating on FNFG, suggesting 2012 revenues of $1.5 billion, earnings of $1.10 and a dividend increase to possibly 70 cents. There are 290 million shares out, and raters reckon FNFG has a low target of $16.50.
Meanwhile, Marsico, Vanguard, BlackRock, State Street, Fidelity, Janus and other institutions own over 200 million shares, and analysts at Raymond James; Sander O’Neill; Keefe, Bruyette and Woods; Janney Montgomery Scott; and FBR Capital actively follow FNFG. This bank has net profit margins of 16 percent, plenty of cash and a dividend that has grown threefold in the past 10 years. And before the Dow began its tumble in early 2011, FNFG traded between $14 and $15.
An interesting but speculative bank stock is Synovus Financial (SNV-$1.47), which has been lending money to folks since 1888. SNV has 5,500 employees working branches in Georgia, South Carolina, Tennessee, Florida and Alabama.
After several years of stinging losses, SNV is back on the road to profitability. Earnings for 2012 will come in between 10 cents and 22 cents, and the shares trade at 60 percent of the $2.60 book value. SNV has $1.2 billion in revenues, $751 million in cash and a 4-cent dividend that could be raised to 5 cents in late 2012, yielding a hair under 3 percent.
While I don’t expect SNV to double in the coming year, I think it could move up to the $2.25-$2.50 range in the coming 12 months and possibly to the $5 level a few years later. So a 1,000-share purchase could be a smart gamble.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or e-mail him at firstname.lastname@example.org.