On Sep 4, 2013, we maintained our long-term recommendation on
M&T Bank Corp.
) 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.
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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
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
) with a Zacks Rank #1 (Strong Buy), while
The PNC Financial Services Group, Inc.
Wells Fargo & Co.
) carry a Zacks Rank #2 (Buy).