UPDATE: Bank of America Downgrades First Niagara Financial

In a report published Thursday, Bank of America Merrill Lynch analyst Erika Najarian downgraded First Niagara Financial (NASDAQ: FNFG) to Underperform from Buy, dropping its price objective to $10.00.

According to the report, the new price objective implies underperformance to bank coverage group over the next 12 months. Since former CEO John Koelmel announced his departure, FNFG modestly outperformed the KRX by 2 percent.

“We had kept our constructive outlook as we believed the announcement of a new CEO would be a positive catalyst for the shares,” the report said. “After a nine-month search, FNFG named interim CEO Gary Crosby (60) as President & CEO – disappointing the market (stock has underperformed the KRX by 6% since), who largely expected an outsider to be named. While we believe Mr. Crosby will do a fine job at the head, we viewed this announcement as a potential positive catalyst for the shares. With this behind, we think the market may focus more on some of the fundamental challenges facing FNFG.”

Some highlights from the report included:

-Higher long rates could impede TBV growth. -P/E discount may prevail as EPS growth below peers.

FNFG closed Wednesday at $10.32.