On Sep 5, 2014, we issued an updated research report on M&T Bank Corporation (MTB). A robust capital base and enhanced credit quality remained strengths while weakening top line and escalating expenses continued to disappoint.
M&T Bank, with a solid business model and diversified products and services, looks set to perform well in the coming period aided by sustained growth in deposits and improving credit metrics. The bank reported better-than-expected second-quarter 2014 results, supported by a considerable fall in provisions.
Moreover, the bank operates as a solid and sustainable regional bank franchise with a footprint that spans seven Mid-Atlantic States and D.C. and maintains a strong dividend policy. This has assisted it in gaining investors’ confidence, which can be seen in the 8% year-to-date increase in share price.
On the flip side, M&T Bank continues to struggle with constantly rising expenses. Moreover, no relief for the bank seems visible in the near term as several investigations and lawsuits from investors and regulators are expected to aggravate costs going forward.
To worsen the situation further for the bank, which had managed to register solid quarterly results even during the financial crisis, revenues in the first half of 2014 reflected a decline of 3.2%. Moreover, the persisting low interest rate environment and sluggish economic growth may keep the bank’s top line under pressure in the upcoming quarters.
Nevertheless, M&T Bank remains well positioned to grow organically as well as inorganically on the back of its healthy liquidity position and sturdy capital base. However, the continuous delay in the merger of the bank with Hudson City Bancorp Inc. (HCBK) hampers the expectations from the entire deal.
This can be observed in the Zacks Consensus Estimate for 2014 as well as 2015, which remained flat over the last 30 days.
Currently, M&T Bank carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked banks include S&T Bancorp Inc. (STBA) and United Financial Bancorp, Inc. (UBNK). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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