M&T Bank Corp. plans to repay most of its $1.08 billion of federal aid by the end of June and has received Federal Reserve Board approval to buy Wilmington Trust Corp.
M&T intends to pay Wilmington Trust's $330 million debt to the Troubled Asset Relief Program within two weeks of the closing of the deal, which still has to be approved by New York and Delaware regulators. Then it will repay another $370 million.
The Buffalo, N.Y., company said it will issue $500 million of preferred shares to maintain sufficient capital levels.
M&T, which has performed better than most large banks through the downturn, did not say in its press release late Tuesday when or how it intends to return the remaining $380 million in aid it had directly received from Tarp and indirectly by buying Baltimore's Provident Bancshares Corp., which had received federal assistance as well.
Analysts said the partial Tarp repayment is a good thing for M&T because it sets up the $68 billion asset-company to repay the government with either no dilution to common shareholders, or minimal dilution. Other big banks that have repaid Tarp have done so by issuing common stock, which M&T has not done yet. It's unclear if it will need to.
The new preferred shares will replace $700 million of preferred shares that were being held by the government. The partial repayment moves M&T closer to "removing one major uncertainty," Joseph Fenech, a managing director with Sandler O'Neill & Partners LP, said in a research note. It also makes it "well-positioned to stand alone as the only large bank to have remained profitable through the downturn, maintained its dividend and avoided a common equity raise" to get out of Tarp.
