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Analyst Blog

On Jun 4, 2013, we reiterated our long-term recommendation on M&T Bank Corporation (MTB - Analyst Report) 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 first-quarter 2013 operating earnings of $2.06 per share beat the Zacks Consensus Estimate of $1.94. However, this compares unfavorably with the prior-quarter earnings of $2.23 per share.

Better-than-expected earnings were primarily aided by reduced provision for credit losses. Moreover, capital ratios showed improvement. However, an increase in expenses and declining net interest and non-interest income were the headwinds.

We view M&T Bank as a sound asset for yield-seeking investors. In Mar 2013, following the release of the Federal Reserve’s 2013 Capital Plan Review (CapPR 2013) process results, the company received no objection to the capital distributions reflected in its 2013 Capital Plan. M&T bank maintained its common stock dividend at its current annual rate of $2.80 per share. Notably, it is the only commercial bank in S&P 500 which has not slashed dividend or executed dilutive equity offering during the financial crisis.

However, low short-term interest rates along with persistent narrow spreads at the short end of the yield curve continue to negatively impact the net interest income for M&T Bank. Though the U.S. economy posted stable to improving economic data during the quarter, including favorable developments in unemployment and housing, concerns about the outlook for the global economy and continued political uncertainty persist.

For M&T Bank, the Zacks Consensus Estimate for 2013 inched up 0.1% to $8.23 per share, over the last 30 days. For 2014, the Zacks Consensus Estimate remained stable at $8.85, over the same time frame. Hence, M&T Bank carries a Zacks Rank #3 (Hold).

Other Major Banks to Consider

Some major regional banks that are worth considering include The PNC Financial Services Group, Inc. (PNC - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report) and Comerica Incorporated (CMA - Analyst Report). All the 3 banks hold a Zacks Rank #2 (Buy).

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