Neutral on M&T Bank - Analyst Blog

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On Sep 4, 2013, we maintained our long-term recommendation on M&T Bank Corp. ( MTB ) at Neutral based on its well-managed global franchise, strong capital base and strategic acquisitions. However, regulatory issues coupled with fundamental pressures on the banking sector might act as deterrents to the company's fundamentals.

Why Neutral?

M&T Bank's second-quarter 2013 operating earnings of $2.65 per share beat the Zacks Consensus Estimate of $2.10. Additionally, this was up 29% from $2.06 earned in the prior quarter.

Better-than-expected earnings were primarily aided by higher revenues on the back of increased net interest and non-interest income. Moreover, declining expenses and improved capital ratios were the positives. However, higher provision for credit losses and increased net charge-offs were the headwinds.

As of Jun 30, 2013, deposits and loan balances remained almost stable, but M&T's total deposits recorded CAGR of 9% over the last 5 years (2008-2012). Further, the company's total loans and leases represented CAGR of 6.2% over the same time frame, primarily driven by increased lending activity in its real estate mortgage portfolio. Therefore, both loan and deposit balances are poised to grow in an improving economy.

Though the economy is stabilizing, the pace of recovery is slow. As a result, we expect overall earnings asset growth at M&T to be somewhat modest. While the rising long-term interest rates during the quarter from historical low levels provide an opportunity to invest in higher-yielding, qualifying and liquid securities, we would prefer a turnaround in the current negative trends in the upcoming quarters before becoming extremely positive on the stock.

For M&T Bank, the Zacks Consensus Estimate for 2013 inched up 7.1% to $8.76 per share, over the last 60 days as all 11 estimates moved north. For 2014, the Zacks Consensus Estimate advanced 1.6% to $8.88 on the back of the upward movement in 10 of the 14 estimates, over the same time frame. Currently, M&T Bank carries a Zacks Rank #3 (Hold).

Other Banks to Consider

Some major regional banks that are worth considering include BankUnited, Inc. ( BKU ) with a Zacks Rank #1 (Strong Buy), while The PNC Financial Services Group, Inc. ( PNC ) and Wells Fargo & Co. ( WFC ) carry a Zacks Rank #2 (Buy).



BANKUNITED INC (BKU): Free Stock Analysis Report

M&T BANK CORP (MTB): Free Stock Analysis Report

PNC FINL SVC CP (PNC): 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: BKU , MTB , PNC , WFC

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