We reiterate our Neutral recommendation on M&T Bank Corporation (MTB) following its fourth quarter and full-year 2010 earnings release. The reiteration is based on the company’s fundamentals, recent acquisitions and the current economic environment.
Fourth Quarter and Full-Year 2010 Results
M&T Bank Corp.’s fourth quarter operating earnings of $1.52 per share exceeded the Zacks Consensus Estimate of $1.45. Earnings expanded significantly from $1.16 per share earned in the prior-year quarter, aided by an increase in net interest income on the back of net interest margin expansion coupled with substantially lower provision for credit losses.
For full-year 2010, operating earnings came in at $5.84 per share, ahead of the Zacks Consensus Estimate of $5.57 and significantly above $3.54 per share earned last year.
Competitors
Similar to M&T Bank, its peers such as KeyCorp (KEY) and Fifth Third Bancorp (FITB) have reported better-than-expected fourth quarter earnings. KeyCorp reported fourth quarter net income from continuing operations of 33 cents per share, handily beating the Zacks Consensus Estimate of 13 cents.
This marked KeyCorp’s third straight quarter of profit since the beginning of the financial crisis in early 2008. A significant improvement in provision for loan losses, solid expense reduction and enhanced non-interest income were the primary factors boosting results.
Fifth Third, on the other hand, reported fourth quarter net income available to common shareholders of $270 million or 33 cents per share, ahead of the Zacks Consensus Estimate of 25 cents. Results were primarily driven by better-than-expected improvement in credit metrics. The company reported a drop in delinquencies and provisions for loan losses. Revenue numbers also came in satisfactorily.
Our Take
M&T Bank managed to put solid quarters even during the financial crisis. Credit quality challenges also seem to have lessened. Strategic acquisitions made in the past have aided its results.
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. The recent acquisition of K Bank and the Wilmington Trust’s purchase, which is anticipated to close by mid-2011, are expected to be accretive to its earnings in the forthcoming years.
However, the tepid recovery of the economy and challenges from the legislative actions remain headwinds to the stock. Yet a sound capital position with its growing core deposit will uphold the bank in the long run.
M&T Bank shares are maintaining a Zacks #3 Rank, which translates into a short-term Hold recommendation.
FIFTH THIRD BK (FITB): Free Stock Analysis Report
KEYCORP NEW (KEY): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis Report
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