5 Banks Stocks Showing 'Real' Earnings Growth

4. M&T Bank
Shares of M&T Bank (MTB) of Buffalo, N.Y., closed at $103.44 Friday, returning 39% year-to-date, following an 8% decline last year.

M&T's shares trade for 2.4 times tangible book value, according to Thomson Reuters Bank Insight, and for 13 times the consensus 2013 EPS estimate of $8.14.

Based on a quarterly payout of 70 cents, the shares have a dividend yield of 2.71%.

M&T had $81.1 billion in total assets as of Sept. 20. The company August agreed to acquire Hudson City Bancorp (HCBK) of Paramus, N.J., for $3.7 billion in stock and cash. Hudson City had $41.9 billion in total assets as of Sept. 30, and its board of directors had been some pressure to sell, after a long-term leverage strategy of increasing wholesale borrowings and investing in long-term mortgage-backed securities backfired in the prolonged low-rate environment, leading to two costly balance sheet restructurings. The merger is expected to be completed during the second quarter of 2013.

For the third quarter, M&T's pre-provision net revenue grew 38% year-over-year, to $504.3 million, with mortgage banking revenue of $106.8 million, increasing from $38.1 million in the third quarter of 2012. Meanwhile, third-quarter noninterest expenses totaled $616.0 million, declining from $ $662.0 a year earlier, with the cost savings "predominantly due to the integration of the operations obtained in the May 2011 acquisition of Wilmington Trust Corporation."

M&T's tax-adjusted net interest income grew 7% year-over-year to $669.3 million in the third quarter, and the net interest margin widened to 3.75% from 3.67% a year earlier.

M&T reported third-quarter net income available to common shareholders of $273.9 million, or $2.18 a share, increasing from $1.32 during the third quarter of 2011. The company's third-quarter ROA was 1.45% and its return on average common equity was 12.40%.

Jefferies analyst Ken Usdin rates M&T a "Hold," with a price target of $106, saying on Oct. 24 that because Hudson City's third-quarter results showed "incremental loan yield compression and lower interest income," he was lowering his 2013 earnings estimate for M&T by a nickel to $8.40. Usdin added that "there are a ton of moving parts and as much as three full quarters left before closing, so a lot could change otherwise."

MTB data by YCharts

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