A bank grows in an uncertain period

People's United Financial is now a regional leader; chief Philip Sherringham sees more opportunity

(STEVEN LEE MILLER for the boston globe)

You may never have heard of People's United Financial Inc. of Bridgeport, Conn., but that's likely to change under chief executive Philip Sherringham. His $1.9 billion acquisition of Chittenden Corp. of Vermont last June turned People's, the holding company for People's United Bank, into the largest locally based retail bank operating in New England with $15.2 billion in total deposits. Sherringham spoke recently with Globe reporter Ross Kerber.

Are you looking to do more acquisitions? The Boston area looks like a hole in the map of where you have branches.
At this point we're looking at any point from Maine to the Washington, D.C., area, the entire Northeast. Having said that, it hasn't escaped my attention that we don't have anything in Boston. We became, overnight, the largest New England bank. That we don't have anything in Boston, obviously that's a gaping hole in our franchise. If we can do something about this, we'd like to.

Is this a good time to be shopping for other banks because their share prices are relatively low, or a bad time because of the problems on their balance sheets?
The two are linked, but I'd say it's a good time. The problems on the balance sheet are reflected in the price, and you have to be sure that you do your due diligence. So it's a matter of doing your homework.

How's the integration of Chittenden coming along?
Pretty nicely, and that's not a surprise. Part of the reason we were interested in the first place is that their culture is close to ours. They're a New England bank, commercially oriented, very focused on the customer relationship. The way that small banks can compete with the largest ones is based on the personal relationships.

Some analysts are making a "bear case" against your stock because you overpaid for Chittenden and it's hard to buy other banks cheaply. What do you say to that?
I respectfully disagree. Everyone I've talked to, the worst I've heard is that we overpaid by a few dollars a share. In the context of a $1.9 billion transaction that's not meaningful. You can be disciplined all day long, but you want to make sure you can get the deal done, and I think it was a good compromise. Chittenden is one of the best banks in the country in its category. You can't buy a Mercedes for the price of a Chevy.

What's the outlook for banking?
Last year we raised close to $3.5 billion in equity, which is a big number by any measure. So our emphasis is to redeploy this capital through acquisitions. We didn't waste any time, the acquisition of Chittenden was the largest we had ever made, and closed Jan. 1. The financial services industry these days is very unsettled, as we know, and there are very few banks that have a lot of capital. We're in an environment where capital is king. I like to say that many other banks, especially the larger ones, have had to dial 1-800-ABU-DHABI to get money, and we don't. We got it at the perfect moment, so we're ideally positioned.

Is the New England economy in a recession?
In New England, recall that especially now with Chittenden, we're much more of a commercial bank. We have lots of middle-market companies as customers, with sales up to $250 million. If anything in the economy starts entering any kind of recession, we would see it right away. But it's so far, so good.

The Federal Reserve's Eric Rosengren recently spoke about the Fed urging banks to reduce their dividend to preserve capital. Is that something you're looking at?
No, we just raised our dividend for the 16th consecutive year, a 12.5 percent increase. It reflects our confidence in our financial situation.

Did being mutualized (partially owned by depositors), as you were until recently, have the effect of keeping your lending out of the riskiest areas?
You can make stupid mistakes whether you're mutual or not. The subprime situation is a good example. I'm still astonished. It made no sense to lend huge gobs of money to people who, statistically, couldn't pay it back. We don't have a single subprime loan.

What's the biggest challenge you still face?
I would suggest the US market is overbanked. Many banks have spent huge sums of money to build up huge networks of branches, many of which aren't profitable. And New England, demographically, isn't growing by leaps and bounds, just 2 or 3 percent growth a year, much less than elsewhere.