M&T Stung by Overhead, Compliance Costs

M&T Bank (MTB) reported fourth-quarter earnings well short of analysts' estimates, capping a challenging year in which regulatory troubles led to spiraling costs.

The $85.1 billion-asset company said Friday that it earned $254.7 million in the fourth quarter, down 17% from the same period in 2012. Per-share earnings of $1.74 were 17 cents below the estimates of analysts polled by Bloomberg.

Growing overhead costs held M&T back. Its noninterest expense rose by 12%, to $703.1 million, as compensation and real-estate-occupancy costs rose.

Reforms to M&T's anti-money-laundering and other Bank Secrecy Act controls also took a substantial toll. In June the Federal Reserve ordered M&T to implement a long list of fixes to its internal compliance and anti-laundering controls; these reforms added about $50 million to the company's operating costs in the fourth quarter compared with the year-prior period, leading to a 36% jump in "other" costs of operation, to $261.4 million.

These internal control problems have left M&T's planned purchase of Hudson City Bancorp, which it agreed to in August 2012, in limbo. The two companies recently extended the deadline to close the deal until Dec. 31.

M&T's fourth-quarter net interest income held steady at $666.5 million, less than 1% shy of its year-prior figure, as loan growth made up for a tighter margin. The company's total earning assets grew by 5%, to $75 billion, offsetting an 18 basis-point decline in net interest margin, to 3.56%.

M&T's noninterest income dipped by 2%, to $446.2 million, as its home-loan revenue cratered. Mortgage banking income dropped by 29%, to $82.2 million, while revenue from deposit service charges slipped by 2%. However, trading income grew by 32%, to $13.7 million, and trust income increased by 8%, to $125.9.

Better credit quality helped reduce the sting of M&T's higher costs. Its provision for loan losses dropped 14%, to $42 million, and nonaccrual loans dropped 14%, to $871.3 million.

Earlier this month, M&T announced a reshuffling of a handful of top executives, expanding the roles of Chief Financial Officer Rene Jones and Executive Vice President Kevin Pearson.

For reprint and licensing requests for this article, click here.
Consumer banking M&A Community banking New York New York
MORE FROM AMERICAN BANKER