Zacks_Analysts' Blog : M&T Bank Stays Neutral - Analyst Blog

We are reiterating our Neutral recommendation on the M&T Bank Corp.’s (MTB">MTB) stock following a detailed analysis of the company’s fundamentals in light of the current economic and regulatory environment.

M&T Bank Corporation’s third-quarter 2011 operating earnings of $1.53 per share were significantly below the Zacks Consensus Estimate of $1.67. Results also lagged the $2.16 per share earned in the prior quarter and $1.55 per share in the year-ago period.

Results reflected an increase in expenses and a reduction in net interest margin.  However, on the positive side, the company reported an increase in net interest income and non-interest income coupled with a substantially lower provision for credit losses.

M&T Bank managed to put solid quarters even during the financial crisis. The company has been increasing its net interest income for the past couple of years. Strategic acquisitions have been a part of the company’s endeavor to grow its business.

The acquisitions of Provident and Bradford in the Mid-Atlantic region have proved to be meaningful, both in terms of the customer base and profitability. During the fourth quarter of 2010, the company purchased K Bank, Randallstown, Maryland through an FDIC assisted deal.

The deal would help the company in expanding its network in the Mid-Atlantic region. Besides M&T Bank, U.S. Bancorp (USB) and Fifth Third Bancorp (FITB">FITB) have also expanded their businesses through FDIC assisted acquisitions.

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 help in boosting the company’s future earnings.

While the tepid economic recovery, modest loan  growth,  pressure  on  net  interest  margin  and regulatory  issues  remain  headwinds  for  the  stock,  a sound  capital  position, strategic acquisitions with  a  growing  core  deposit will  uphold  the  bank  in  the  long  run. Hence, our Neutral recommendation on the stock remains in place.

Additionally, M&T Bank currently retains its Zacks #3 Rank, which translates into a short-term Hold rating.