M&T Bank Corporation (MTB): This Bank Has 3 Problems, But 1 Trumps Them All

The biggest issue facing the bank is they seem to be deluding themselves into believing that their portfolio is getting better, when in fact it’s getting worse. In the last three quarters, look at the difference between their non-performing loans, and their allowance for credit losses:

As you can see, M&T’s non-performing loans are growing, while the bank has actually lowered slightly its loan loss reserves. If this trend doesn’t improve, the bank may have to take a charge against earnings to allow for greater losses.

Better Options
Investors need to realize what they are getting with M&T Bank Corporation (NYSE:MTB). The bank isn’t growing deposits at the same rate as several of their peers. Their non-performing loan percentage is the second worst and isn’t improving. In addition, the bank is releasing loan loss reserves in anticipation of better credit quality. This doesn’t sound like the recipe for a winning investment to me.

Given the alternatives, either BB&T Corporation (NYSE:BBT) or U.S. Bank look like better options. Both banks are expected to grow faster than M&T, have lower projected P/E ratios, and much better credit quality. If you want more information about these two banks, consider adding BBT and USB to your personalized Watchlist to keep up with developments. Just don’t wait too long to decide, M&T stock isn’t far from its 52 week high, but if the bank’s credit quality issues persist, it might be a while before the stock sees this level again.

Chad Henage owns shares of BB&T Corporation (NYSE:BBT); The Motley Fool owns shares of PNC Financial Services (NYSE:PNC).

The article This Bank Has 3 Problems, But 1 Trumps Them All originally appeared on Fool.com.

Chad is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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