) -- A


(C) - Get Report

analyst gave a vote of confidence to

M&T Bank's

(MTB) - Get Report

impending deal for

Wilmington Trust

( WL) by increasing earnings estimates and his expected target price.

Following a meeting with M&T's senior management, Citi analyst Keith Horowitz writes in a Dec. 28 note to clients that he is more optimistic that the deal will fall in line with M&T's history of "well priced acquisitions."

"In our view, the next couple years will be challenging for the banking industry to deliver top line growth due to a prolonged low rate environment, and we believe M&T's acquisition of Wilmington Trust is extremely well timed, as well as well-priced...and should ensure above average growth for M&T over the next couple years," according to the note.

Horowitz raised 2011 estimates by 10 cents a share to $5.75, and 2012 estimates by 15 cents a share to $7.50. Horowitz also raised his 12-month price target by $5 to $91 on M&T's stock.

He reiterated a hold rating on M&T despite the bank's "near-term outlook

which is among the strongest of its peers."

M&T and Wilmington Trust

announced the deal in early November in conjunction with the Delaware bank's report of a third-quarter loss of $4.06 per share.

Wilmington Trust said at the time the primary causes of the loss were the continued deterioration in commercial credit quality, which resulted in a loan loss provision of $281.5 million, and income tax expense of $100.7 million, as the company established a valuation allowance on deferred tax assets.

Some analysts at the time were concerned about M&T's ability to take on Wilmington Trust's troubled balance sheet, however Horowitz is increasingly positive on the deal.

"On paper, we view this as a very strong strategic fit for M&T as it opens up a new market where it will have top market share," the note says. "M&T typically does very well in the smaller markets where it has large market share, since it gives them strong pricing power. While the deal opens up an important new market for M&T that fits well within its geographic footprint, the real key to the deal will be that it adds a significant new fee business (wealth management) that it can now cross sell to its existing footprint."

Still, M&T's stock outperformance has come from the recent Wilmington Trust announcement, but further upside as a result of the deal is "not likely to be evident until 2012," Horowitz writes.

M&T shares rising 0.7% to $87.41. The stock is up 34% this year.

-- Written by Laurie Kulikowski in New York.

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Laurie Kulikowski


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