M&T's Wilmers Defends Scrutiny of Hudson City Deal

Robert Wilmers, the chairman and chief executive of M&T Bank (MTB), used his annual message to shareholders to defend government scrutiny of his deal for Hudson City Bancorp, take a swipe at megabanks and sing the praises of the bank's hometown of Buffalo, N.Y.

M&T first announced its agreement to acquire Hudson City in September 2012, but the deal has since been delayed twice because of issues related to Bank Secrecy Act compliance. The deal currently is expected to close by the end of this year.

Wilmers, who has never been shy about voicing his frustration with government regulation, said in his letter that he fully supports regulators' aggressive vetting of money-laundering issues.

"Regulators would clearly be remiss not to seek, aggressively, a heightened level of scrutiny on the part of financial institutions," he wrote. M&T "could have done a better job of keeping pace with regulatory expectations and advances in technology in this area."

Wilmers lauded M&T's efforts to boost the quality of its compliance in this area. "The system we are building will have the capacity to identify those clients whose histories show them to be at highest risk for criminal behavior through review of up to 105 pieces of information for each account, ranging from financial activity to negative news searches," he said.

In other sections of Wilmers' letter, the M&T chief slammed his much-bigger rivals for various sins. One is the largest banks' increasing reliance on trading and the accompanying ownership of physical assets and commodities, such as "metal warehouses, oil tankers, power plants, natural gas pipelines, coal mines, wind turbines, deep water exploration and uranium supplies."

"As one looks at the sheer breadth of banks' ownership of such assets and operations, one is inevitably left to wonder how they fit into the central role of financial intermediation," he said. The Volcker Rule "is a step forward in limiting proprietary trading within the banking system," Wilmers said.

Wilmers used the letter to highlight "what may be signs of a renaissance in Buffalo" and to point out M&T's contributions to western New York. Buffalo's per capita personal income rose by the second-fastest rate of the 100 largest American cities between 2007 and 2012. Part of the surge is driven by about $1.7 billion in new construction in the Buffalo area. M&T will contribute to that through "a state-of-the-art data center to be commissioned in 2014," he said.

M&T also plans to invest about $20 million "to substantially upgrade our web banking platform and our mobile banking capabilities," Wilmers said. M&T's hometown rival, First Niagara Financial Group (FNFG), is also spending up to $250 million to improve its technology.

Although Wilmers did not address his own pay in the yearly shareholder letter, M&T issued its proxy statement last week, which included details on Wilmers' compensation. His salary fell to $950,000 in 2013, compared to $1.85 million the previous year. But his total compensation, including a bonus and stock awards, rose to about $3.7 million from about $3.4 million.