M&T Bank Stays Neutral - Analyst Blog

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We have reaffirmed our Neutral recommendation on M&T Bank Corp. ( MTB ) following a detailed analysis of the company's fundamentals and post the Federal Reserve Board's limited Capital Plan Review.

M&T Bank Corp's fourth-quarter 2011 operating earnings of $1.20 per share were way below the Zacks Consensus Estimate of $1.46 and lagged earnings of $1.53 per share in the prior quarter and $1.52 in the year-ago period.

An increase in expenses related to the Wilmington Trust acquisition was the downside. However, quarterly results were aided by an increase in net interest income and non-interest income coupled with lower provision for credit losses.

M&T Bank managed to post solid quarters even during the financial crisis. The company has been increasing its net interest income for the past couple of years. Moreover, strategic acquisitions have been part of the company's endeavour to grow its business.

The purchases of Provident and Bradford in the Mid-Atlantic region have proved to be meaningful, both in terms of customer base and profitability. In 2011, the company also completed the acquisition of Wilmington Trust. The deal added 55 branch locations, 225 ATMs and $10.7 billion in assets to M&T, and is expected to boost the company's earnings going forward.

Recently, M&T Bank Corp. announced that it was part of the Federal Reserve Board's limited Capital Plan Review of eleven bank holding companies. The Fed allowed M&T Bank Corp. to continue paying its current common stock dividend at the annual rate of $2.80 per share, subject to its Board's approval.

This review was conducted in parallel with its Comprehensive Capital Analysis and Review of the nineteen largest bank holding companies such as Citigroup Inc. ( C ) and JPMorgan Chase & Co. ( JPM ) and Wells Fargo & Co. ( WFC ).

Though there were no concerns regarding M&T Bank's current capital position, the company would need to submit another capital plan to the Fed if it wishes to hike its common stock dividend, buyback common shares or repay its remaining $381.5 million in TARP preferred stock.

Moreover, going forward we believe the sluggish economic recovery, low rate environment and consequent pressure on margin as well as regulatory issues will remain an overhang on the stock.

Therefore, the risk-reward profile seems balanced for M&T Bank Corp. and we have reaffirmed our Neutral recommendation.

Moreover, M&T Bank Corp. shares currently retain the Zacks #3 Rank, which translates into a short-term Hold rating.


 
CITIGROUP INC ( C ): Free Stock Analysis Report
 
JPMORGAN CHASE ( JPM ): Free Stock Analysis Report
 
M&T BANK CORP ( MTB ): Free Stock Analysis Report
 
WELLS FARGO-NEW ( WFC ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: C , JPM , MTB , WFC

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