M&T Bank Corporation (NYSE:MTB) is a relatively large regional bank, with most of its operations concentrated in the Northeastern U.S. M&T has an excellent history of profitability, and didn’t even have one quarter in the red during the entire financial crisis, a claim even some of the “rock-solid” big banks can’t make. The company also is extremely well capitalized and has grown tremendously over the years, primarily due to its ambitious acquisition record. With its biggest acquisition yet announced last year, is now a good time to get in on this one, or would we be better off with one of M&T’s big brothers?
M&T Bank Corporation (NYSE:MTB) operates a total of 707 branches, with the majority in New York, New Jersey, Maryland, and Pennsylvania. The company also has a small, but significant presence in five other states and in Washington, D.C. M&T is and has been one of the most financially sound banks in the market, and as a result, the financial turmoil that spread across the sector in recent years didn’t affect the company nearly as much as its competitors. M&T has much lower loan default rates than its peers, and the fact that the bank remained profitable throughout the entire crisis speaks volumes about its strength. The chart below shows how M&T’s earnings history compares with other banks.
Over the years, M&T Bank Corporation (NYSE:MTB) has done a tremendous amount of acquisitions in order to increase their footprint. Recent major acquisitions include Provident Bankshares for $270 million in 2009 and Wilmington Trust Corp for $406 million in 2011. Last year, M&T announced their largest deal to date, agreeing to acquire Hudson City Bancorp, Inc. (NASDAQ:HCBK) for about $4.4 billion.
The pending acquisition and what it means
Hudson City is a regional bank with 135 branch locations, mostly in New Jersey. The company has about $25 billion in deposits and $28 billion in loan receivables, and will effectively double M&T’s banking presence in New Jersey, where it currently has 98 branches and just under $20 billion in deposits.
What does this deal mean for M&T? Well, first of all, as shares of M&T rise, this deal gets more and more expensive since each Hudson City shareholder is receiving a predetermined amount of M&T Bank Corporation (NYSE:MTB) stock. Once the deal finally closes, the company will instantly become one of the big players in New Jersey banking, and the end result should be a market share of over 15% in the state (they have 7.1% currently). Additionally, I anticipate at least some consolidation of the New Jersey branches which will result in significant cost saving once the acquisition is fully integrated.