M&T Bank Corporation

This is our first report on a regional lender that played the rate hike well with its high-quality deposit base – M&T Bank Corporation. The company is happy with its results in the quarter despite many challenges. In the fourth quarter, taxable-equivalent net interest income increased by $150 million to $1.84 billion. Their interest-bearing bank deposits decreased from $41.9 billion to under $25 billion due to their repositioning the balance sheet to use surplus cash. Average commercial real estate loans fell by $592 million, or 1%, to $45.7 billion due to decreases in average construction loans. Construction balances increased little from the linked quarter on an end-of-period basis. Furthermore, average commercial deposits fell by $4.8 billion as business owners transferred funds to sweep accounts on and off the balance sheet to pay down debt and make principal distributions. The company also executed its long-awaited merger with People’s United. In addition, they finished the system conversion and are still integrating this lucrative franchise. The financial gains from this combination align with or somewhat above their initial projections. We initiate coverage on the stock of M&T Bank Corporation with a ‘Buy’ rating.