M&T Bank's shares have now returned 32% year-to-date, following a 9% decline during 2011.
The shares trade for 2.4 times their reported June 30 tangible book value of $40.52, and for 12 times the consensus 2013 earnings estimate of $7.78 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $6.91.
M&T in August agreed to acquire
Hudson City Bancorp
of Paramus, N.J., for about $3.7 billion in stock and cash. The deal valued Hudson City at $7.22 a share, or 80% of its reported June 30 tangible book value of $9.08.
M&T Bank of Buffalo, N.Y., has $80.8 billion in total assets, and Hudson City has $43.6 billion in assets, with 135 branches, with 97 branches in New Jersey, 29 in New York, and nine in Fairfield County, Conn.
The U.S. Treasury on Aug. 17 completed a public offering of the $381.5 million in M&T TARP preferred shares held by the government. The preferred shares have a 5.00% coupon, which was originally scheduled to rise to 9.00% in February 2014 for the remaining $230 of the bank's original TARP bailout, with the coupon on the $151.5 million in assistance originally provided to Provident Bancshares rising to 9.00% in November 2013.
M&T on Aug. 20 proposed an innovative amendment -- which was later approved -- under which the dividend rate on all of the former TARP preferred shares will rise to 6.375% on November 15, 2013, with the company agreeing not to redeem the shares until Nov. 15, 2018. While this is significantly lower than the original reset rate of 9.00%, it was a good deal for all parties, because it enabled M&T to avoid repaying TARP over the next year, while providing the preferred shareholders an above-market dividend.
The company will announce its third-quarter results on Oct. 17, with a consensus EPS estimate of $1.85, increasing from $1.71 in the second quarter, and $1.32, during the third quarter of 2013.
M&T has been a good earnings performer, with an operating return on average assets of 0.97% and a return on tangible common equity of 13.63% for the 12-month period ended June 30, according to Thomson Reuters Bank Insight.
Credit Suisse analyst Craig Siegenthaler on Wednesday upgraded M&T Bank to an "Outperform" rating from a neutral rating, saying that "MTB's current valuation and consensus estimates are still not fully reflecting the EPS/TBV benefits from the HCBK acquisition," and that the company "may complete additional accretive acquisitions over the next few years."
The analyst added that "we look for MTB's premium valuation to hold and estimate upside to consensus '13/'14 EPS. Recall - while MTB's relatively rich valuation deters capital return through buy-backs, it does provide MTB with a strong currency as a regional consolidator in the Mid-Atlantic, and supports above-average dividend payouts and TBV growth."
Siegenthaler estimates that MTB will earn $7.43 a share for all of 2012, followed by EPS of $8.48 in 2013 and $9.05 in 2014.
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