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M&T Bank Restates Q4 Earnings

Zacks Equity Research

Following the settlement of the lawsuit of its Wilmington Trust unit, M&T Bank Corporation (MTB) announced revised GAAP earnings for fourth-quarter 2013 and full-year 2013. For the resolution of the case which was filed in Delaware Chancery Court in Wilmington, the company increased litigation reserves by $40 million as of Dec 31, 2013.

The litigation involved the trust’s management, established by a Mennen family member. Last year, heirs of Mennen Co., maker of Speed Stick deodorant sued Wilmington Trust and a Mennen family member and demanded more than $100 million in damages over investment losses. However, the settlement amount is undisclosed.

Revised Q4 and 2013 GAAP Results

M&T Bank restated fourth-quarter 2013 net income of 221.4 million or $1.56 per share, down from the previously reported net income of 245.7 million or $1.74 per share. For full-year 2013, revised net income came in at $1.14 billion or $8.20 per share compared with the previously reported net income of $1.16 billion or $8.38 per share.

Further, as of Dec 31, 2013, the revised estimated Tier 1 common capital ratio was 9.22%, down from the previously reported ratio of 9.25%, while the estimated Basel III Tier 1 common equity ratio was 8.98%, down from the previously reported ratio of 9.01%. Further, revised tangible common equity to tangible assets ratio was 8.39% versus previously reported ratio of 8.42%.

Other costs of operations, which were reported at $261.4 million, have been increased to $301.4 million in the quarter, including litigation-related charges of $40 million. Moreover, other costs of operations for the full-year 2013 came in at $860.3 million after revision, up from $820.3 million previously reported.

Our Viewpoint

Following the financial crisis, the market witnessed a rise in the number of distressed banks ready to be taken over by their stronger counterparts. M&T Bank capitalized on such opportunities. In fact, strategic acquisitions have been a part of M&T Bank’s business expansion policy.

The proposed acquisition of Hudson City Bancorp Inc. (HCBK) in a cash and stock deal worth $3.7 billion is expected to provide upside to M&T Bank’s top line by leveraging the former’s retail network as well as product and balance sheet diversification.

The company, with its solid business model and strategic acquisitions, is well poised for growth. While the sluggish economic recovery, regulatory issues and low interest rate environment remain headwinds for M&T Bank, we believe that its sound capital position, improving credit quality and growing core deposit bode well in the long run.

M&T Bank currently carries a Zacks Rank #3 (Hold).

Some better-ranked major regional banks worth considering include SunTrust Banks, Inc. (STI) and BB&T Corp. (BBT), both with a Zacks Rank #2 (Buy).

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