* Q1 EPS $0.08 vs estimate of $0.10 * Raises annual dividend by $0.01 * Q1 net interest income falls 14 pct to $142.8 mln
* Shares fall almost 5 pct after the bell (Adds analyst comments, details)
By Anurag Kotoky
BANGALORE, April 16 (Reuters) - People's United Financial Inc (PBCT.O) posted a 77 percent jump in its first-quarter profit, but the results fell short of market estimates on margin pressure and a drop in net interest income.
Apart from the higher margin pressure, the company's results were solid, Anthony Polini, an analyst at Raymond James told Reuters.
"Their credit quality is probably in the top one percent in the nation. Their balance sheet is rock solid. They are just going to have these low levels of earnings until we get higher interest rates or they leverage their capital through acquisitions or putting on more assets," Polini said by phone.
People's United, which expects to double or triple its asset size over the next two to five years, has been one of the better capitalized banks in the country.
The company still feels it is best to exercise patience as it works toward an acquisition that will enhance the long-term profitability of the company, Chief Executive Philip Sherringham said in a statement.
According to analyst Polini, it could take a year or at least six months for the company to go for an acquisition, despite an excess liquidity of about $2 billion on its balance sheet. "They have narrowed down their search to the point where there is hardly anyone on the list."
People's United is looking for a relatively high quality commercial bank at a distressed price and Valley National Bancorp (VLY.N) could be an interesting acquisition target for the company, Polini said.
However, Valley National could be reluctant to get sold as its stock is trading at a 50 percent discount to its 52-week high at the moment, Polini added.
Raymond James makes a market in People's United shares.
The savings and loan holding company earned $26.7 million, or 8 cents a share, compared with $15.1 million, or 5 cents a share, a year earlier.
Analysts were looking for a profit of 10 cents a share, excluding items, according to Reuters Estimates.
"First-quarter earnings reflect expected margin pressure associated with the historically low interest rate environment and reduced fee income stemming from continued uncertainty in the equity markets...," the company said.
People's United, which competes with Northwest Bancorp NWSB.O, The Bancorp (TBBK.O) and First Niagara Financial Group FNFG.O, said net interest margin fell 30 basis points sequentially to 3.25 percent.
The Bridgeport, Connecticut-based company said non-performing loans rose almost 50 percent sequentially to $126.1 million as of March 31.
Shares of the company, which was added to the S&P 500 Index .SPX last November, fell about 5 percent to $16.25 after the bell. They closed at $17.05 Thursday on Nasdaq. (Editing by Himani Sarkar)