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Why Hold Strategy is Ideal for M&T Bank (MTB) Stock Now

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On Sep 4, we issued an updated research report on M&T Bank Corporation (MTB - Free Report) . The bank currently displays strength in top-line and capital position. However, increasing cost base remains a woe.

M&T Bank’s net interest income has been rising consistently, recording a compound annual growth rate (CAGR) of nearly 7.7% over the last six years (ended 2016). Reduced margin pressure on the back of rate hikes will also benefit the bank.  

M&T Bank continues to enhance shareholders’ value through steady capital deployment activities. It raised the common stock dividend by 7% in February 2017 and plans another hike in second-quarter 2018 in the range of 5 cents to 80 cents per share. The bank also has a share repurchase program of up to $900 million underway. These activities look impressive due to M&T Bank’s favorable debt/equity ratio when compared to the broader industry.

However, M&T Bank’s consistently rising cost base remains a major concern. Expenses witnessed a CAGR of 5.4% over the last five years (ended 2016). The bank’s ongoing investments in technology and operational infrastructure are likely to keep expenses under pressure.

Shares of M&T Bank have gained 28.6% over the past year, at par with the industry.

M&T Bank’s activities during the year were inadequate to win analysts’ confidence. Hence, the Zacks Consensus Estimate for current-year earnings have remained stable at $9.29 over the past 30 days. As a result, the stock currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space are The PNC Financial Services Group, Inc. (PNC - Free Report) , State Street Corporation (STT - Free Report) and Washington Federal, Inc. (WAFD - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PNC Financial’s Zacks Consensus Estimate for current-year earnings was revised 1.9% upward for 2017, in the past 60 days. Also, its share price has increased 41.5% in the past 12 months.

State Street’s current-year earnings estimates were revised 3.7% upward, over the past 60 days. Further, the company’s shares have jumped 32.4% in a year.

Washington Federal’s Zacks Consensus Estimate for current-year earnings was revised nearly 1% upward, over the last 60 days. Moreover, in the past year, its shares have gained 18.8%.

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