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M&T Bank, First Niagara: The Weekly Bank Stock Roundup

NEW YORK ( TheStreet) -- Bank consolidation -- as well as what to do about the prolonged residential mortgage mess -- seemed to be recurring themes in the bank stock sector over the past week.

The Keefe, Bruyette & Woods bank stock index, which tracks the performance of the 25 largest U.S. banks, ended the week down 2.5%.

The topic of bank consolidation has been hinted at in the sector for several months now as more banks turn back to strategic M&A deals rather than acquisitions of failed banks. Until this week, just a few small traditional M&A deals had been done this year.

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However, First Niagara ( FNFG - Get Report ) pushed out of the gate Thursday by saying it would acquire New Alliance Bancshares (NAL) for $1.5 billion in a cash and stock transaction.
John Koelmel
First Niagara CEO John Koelmel

The deal represents a 24% premium for New Alliance shareholders and is the largest bank acquisition deal since late 2008. The First Niagara-New Alliance combination represents one of the first true signs that the sector is returning to normal M&A deals and that more deals could be on the way.

New Alliance shares rose 12.5% on the day of the announcement.

Early in the week market rumors abounded that M&T Bank (MTB - Get Report) and Banco Santander (STD) were rekindling acquisition talks. The two banks had been in merger discussions about a possible tie-up earlier in the year, but those talks stalled in the spring. The speculation is that one possible combination could be for M&T Bank to acquire Sovereign Bank, which is owned by Santander. The Spanish bank would then take a minority stake in the newly combined bank.

Shares of M&T rose 5.2% this week on the speculation. The stock is up roughly 36% year-to-date.

(At press time no official announcement of a deal had been made, but check back at TheStreet Monday morning at 7 a.m. EDT for Maria Woehr's and Laurie Kulikowski's Bank Stock Buzz video on what an M&T/Santander deal would mean for both banks and the industry.)
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