On Mar 11, we reiterated our Neutral recommendation on
M&T Bank Corporation
) based on its healthy mortgage banking revenues, rising net
interest income and healthy capital position. However,
deteriorating credit metrics, rising expenses and unsettling
macro economic issues remain the major causes of concern. M&T
Bank retains a Zacks Rank #3 (Hold).
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M&T Bank's fourth quarter 2012 earnings came in at $2.23 per
share, beating the Zacks Consensus Estimate by 6 cents. Total
revenues came in at $1.2 billion, unchanged from the prior
quarter. Moreover, revenues surpassed the Zacks Consensus
Estimate of $1.1 billion. Further, M&T Bank has delivered an
average earnings surprise of 6.75% last year.
Over the last 60 days, the Zacks Consensus Estimate for 2013
hiked by 1%, on the back of upward movement of a number of
estimates. Further, an improving net interest income, even during
the financial crisis and opportunistic acquisitions, helped the
company sustain the Neutral recommendation. Further, healthy
capital position and a timely exit from the TARP are the
positives for the stock. Extensive capital deployment activities
also continue to reinforce investors' confidence in the stock.
However, the low interest rate environment and changing
regulatory landscape are expected to be the headwinds in the
future. Further, we remain concerned about the bank's significant
amount of commercial and industrial loans in areas that has
experienced less economic growth. In addition, we remain wary of
the continuously rising regulatory expenses, which will lead to
higher cost of compliance and may temper profitability in the
near-to-mid term. In addition, we believe that the company's
flexibility with respect to its investments and lending volumes
would be limited in the medium term, given the stricter capital
Other Stocks to Consider
Other banking stocks that are currently performing well include
First Defiance Financial Corp.
Flagstar Bancorp Inc.
Meta Financial Group, Inc.
). All these carry a Zacks Rank #1 (Strong Buy).