This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

M&T Bank a Buy, Despite Hudson Merger Delay

Stocks in this article: MTB HCBK HCBK BAC WFC USB PNC


Although concerns were raised about some of Hudson's "tainted" portfolio (including what some consider as an unattractive residential mortgage business), I believe Hudson's market reach in the northeast, particularly in greater New York, is more than an offsetting advantage. And I believe that was one of the reasons M&T management had to make this deal.

Given M&T's long track record of strong expense control and returns on capital, management would have extracted above-average value in a relatively short period of time. And this is what investors were banking on. That was the case until management announced last April that the merger holdup was due to the Federal Reserve having identified "certain regulatory concerns" with M&T's compliance programs. The type that include anti-money-laundering and secrecy act.

Not to make light of these requirements, they do, however, sound more serious than they actually are. It's worth noting that every bank merger is subjected to these tests, especially in the post-Enron and "too-big-to-fail" eras.

Having now experienced two delays since the announced deal, last week management of both companies were somewhat non-committal about when they expect this deal to be finalized. "There can be no assurances that regulatory approval will be obtained," the announcement said, "or that the merger will be completed" by the new "walkaway" date of Dec. 31, 2014 that allows both banks can escape the agreement with penalty.

Nevertheless, there's a chance that this new imposed deadline might get the ball rolling once and for all. I don't believe the Fed's "regulatory concerns" are valid enough reasons to hurt what is truly in the best interest of not only both banks, but also shareholders, given the accretion potential that is on the table.

Investors should expect more details Wednesday when M&T is due to report fourth-quarter and year-end earnings results. The Street will be looking for $1.92 in earnings per share on revenue of $1.10 billion, which would represent year-over-year revenue decline of 1.4%. As impressive as these numbers may appear relative to what's expected from the likes of Bank of America, news related to the Hudson deal will be what moves this stock.

The good news in all of this is that M&T has been posting exceptional loan growth, while boasting one of the best spreads among the regional majors, which includes U.S. Bancorp (USB) and PNC Financial (PNC). And despite the fact that M&T stock does carry a premium above both USB and PNC, I would be a buyer here ahead of earnings. Even with this recent holdup to the merger, these shares should continue their ascent towards $130 per share and beyond on the basis of M&T's own execution.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs