M&T Bank Tops Zacks Estimate - Analyst Blog - Citigroup (NYSE:C), Goldman Sachs Gr (NYSE:GS)

M&T Bank Corporation's (MTB) fourth quarter operating earnings of $1.52 per share exceeded the Zacks Consensus Estimate of $1.45. Earnings significantly expanded from $1.16 per share earned in the prior-year quarter, aided by an increase in the 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.

On a GAAP basis, M&T Bank reported a net income of $204 million or $1.59 per share, up from net income of $137 million or $1.04 per share in the prior-year quarter. For full year 2010, the company reported net income of $736 million or $5.69 per share, which was nearly double prior year's net income of $380 million or $2.89 per share.

M&T Bank's net interest income came in at $580 million, up 3% year over year. The growth stems from a 14 basis point expansion in the net interest margin, which improved to 3.85% from 3.71% in the year-earlier quarter. However, the growth was partially offset by a 1% decline in average earning assets.

Loans and leases, net of unearned discount, nearly remained flat year over year at $52.0 billion at 2010 year-end, compared with $51.9 billion at 2009 year-end. However, total deposits advanced 5% from the prior-year quarter to $49.8 billion.

M&T Bank'snon-interest income increased 8% year over year to $287 million.This reflects a reduction in net losses from investment securities. Excluding these losses and the merger-related gain realized on the K Bank transaction during the recent quarter, non-interest income came in at $286 million, down 5% from $300 million in the comparable 2009 quarter.

The results decreased due to lower residential mortgage banking revenues and service charges on deposit accounts, partially offset by higher trading account and foreign exchange gains and credit-related fees.

M&T Bank's non-interest expense were $469 million, down from $478 million in the year-earlier quarter. Excluding non-operating expenses and other merger-related costs, non-interest operating expenses came in at $455 million, essentially flat year over year. Efficiency ratio slightly improved to 52.5% from 52.7% in the year-earlier quarter.

Credit metrics improved during the quarter, witnessing a 41% decline in provision for credit losses to $85 million and a 43% reduction in net charge-offs to $77 million. Net charge-offs as a percentage of average loans outstanding were 0.60%, down from 1.03% in the year-ago quarter. However, the ratio of nonperforming assets to total loans plus real estate and other foreclosed assets slightly moved up to 2.79% from 2.74% a year earlier.

M&T Bank's net operating income expressed as an annualized rate of return on average tangible assets and average tangible common shareholders' equity was 1.20% and 18.43%, respectively, compared with 0.92% and 16.73% in the comparable prior-year period. M&T Bank's tangible common equity to tangible assets ratio was 6.19% at December 31, 2010, compared with 5.13% at December 31, 2009.

During the recent quarter, M&T Bank completed the FDIC-assisted acquisition transaction with K Bank and announced its planned merger with Wilmington Trust. The deal is expected to close by mid-2011.

Similar to M&T Bank, JPMorgan Chase & Co. (JPM), which released its fourth quarter financial results today, reported a jump in earnings owing to lower loan loss provisions. We look forward to the next week when a number of the Wall Street biggies such as Citigroup Inc. (C) (January 18)and Goldman Sachs Group Inc. (GS) (January 19) are scheduled to report.

M&T Bank managed to put solid quarters even during the financial crisis and continues to enjoy growth in net interest margin. The acquisition of Provident and Bradford in the Mid-Atlantic region has proved to be meaningful, both in terms of customer base and profitability.

Credit quality challenges also seem to have lessened. Though the tepid recovery of the economy and challenges from the legislative actions remain headwind for the stock, a sound capital position with a 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.