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Shares of M&T Bank Corporation (MTB - Analyst Report) closed at $114.30 on Dec 6, recording a year-to-date return of 16.1%. Impressive organic growth, solid liquidity position and continuous improvement in credit quality were the driving forces behind this growth story. Hence, we do not discourage keeping its shares in your portfolio.

However, we are not very confident that these positive factors will translate into further price appreciation going forward as a sluggish economic recovery and stringent regulatory requirements would put considerable pressure on its top line. Consequently, adding more shares of M&T Bank to your portfolio may not be a good idea.

Why This Stance?

M&T Bank’s third-quarter 2013 earnings per share outpaced the Zacks Consensus Estimate. Results reflected top-line growth and a strong capital position. However, higher expenses were a matter of concern for the quarter.

M&T Bank’s solid liquidity position enhance investment in strategic acquisitions, paving the way for further growth. The most recent Hudson City deal will not only aid M&T in leveraging its top line through Hudson City’s retail network but also help in expanding its franchise in eastern U.S. Moreover, the company has witnessed growth in loan balances and a gradual improvement in its credit quality over the last few years.

However, it is expected that a stressed and challenging macroeconomic environment and a stringent regulatory landscape will affect the profitability as well as efficiency ratio of the company. Moreover M&T Bank’s earnings asset is expected to grow modestly owing to a slow pace of economic recovery.

Additionally, the Zacks Consensus Estimate has not been in trend when it comes to estimate revisions. Over the last 60 days, the Zacks Consensus Estimate for 2013 declined 1.4% to $8.57 per share, while for 2014 it declined almost 6% to $8.31 per share. M&T Bank currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

If you are interested in the finance sector, you may consider a few better-ranked stocks like First Interstate Bancsystem Inc. (FIBK - Snapshot Report), German American Bancorp Inc. (GABC - Snapshot Report) and Mainsource Financial Group (MSFG - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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