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People's United predicts lower NIM in 2020

Bridgeport, Conn.-based People's United Financial Inc. is anticipating a net interest margin of 3.0% to 3.1% in 2020, management said on the bank's 2019 fourth-quarter earnings call.

This is down from its 2019 net interest margin of 3.14%. The bank assumed no change to the federal funds rate in its estimate.

The bank's margin is pressured from repricing of the loan portfolio and an inability to lower deposit rates much further, management said on the call. Management said if the Federal Reserve does not change rates, it will be more difficult for the bank to lower its deposit pricing. "In a steadier environment, the ability to make moves will be a little bit muted," one member of the management team said.

According to an investor presentation, the bank plans to grow loans between 2% and 4%. This excludes runoff from select portfolios of United Financial Bancorp Inc., which People's United acquired in 2019, as well as the transactional portion of its New York multifamily portfolio, which is also in "runoff mode."

The bank expects net interest income to grow 9% to 11%, with non-interest income growing between 2% and 4%. Operating non-interest expenses are expected to be in the range of $1.19 billion to $1.22 billion. The bank's effective tax rate is expected to be between 20% and 22%, according to the presentation.

Bank management also discussed People's United's branch strategy, saying it is interested in expanding through de novo branches in addition to its acquisition strategy. Boston is one area in which the bank is considering expanding, but it is closing branches in other locations in order to "optimize" its branch strategy, management said.