August 28, 2012 / 8:55 PM / 5 years ago

TEXT-Fitch affirms M&T Bank Corp

Aug 28 - Fitch Ratings has affirmed the long-term and short-term Issuer
Default Ratings (IDRs) of M&T Bank Corporation (MTB) at 'A-' and 'F1',
respectively. The Rating Outlook is Stable. A complete list of ratings 
follows at the end of this release.

MTB has announced that it has signed a definitive agreement to purchase Hudson 
City Bancorp (HCBK), based in New Jersey. 

In Fitch's view the deal is a positive for both banks given the benefits of the 
combined institution. The impact to MTB's balance sheet and financial profile is
positive given that the acquisition is accretive to earnings and capital at 
closing (expected in 2Q13). MTB's Tier 1 common capital is projected to improve 
by 30-40bps. Although MTB does have a presence in New Jersey through its 
commercial lending activities, the deal gives MTB a retail franchise that fits 
well within its footprint. For HCBK, the deal addresses its challenges regarding
earnings pressures and interest rate risk. Fitch does not rate HCBK. 

Although HCBK is presently operating with higher NPLs versus its historical 
averages, Fitch considers MTB's 1.5% credit mark appropriate given it represents
six years of HCBK's annualized year-to-date NCOs at June 30, 2012. Further, 
Fitch notes that HCBK's NCOs have remained low and peaked in 2010 at 31bps. 
Additionally, HCBK's residential portfolio is mainly first-lien, with 80% of 
loans exposed to NJ, NY, CT, which are markets that have experienced less real 
estate deprecation than other areas in the country. 

Fitch also views the premium of 12%, or 0.8x tangible book value as a reasonable
price given the forecasted revenues, positive impact to capital, and expected 
cost saves of 24%. 

The affirmation and Stable Outlook continue to reflect MTB's consistently sound 
financial and credit performance during a difficult operating environment. 
Additionally, Fitch views the company's solid franchise, veteran management 
team, and good revenue diversification as rating strengths. 

Offsetting these positives, MTB manages with capital levels lower than its 
peers, although Fitch considers current capitalization to be adequate. In 
Fitch's view, MTB is able to operate with leaner capital given strong equity 
generation, good asset quality, solid reserves when compared to net charge-offs 
(NCOs) and moderate dividend payout. 

Nonetheless, Fitch recognizes that MTB faces some challenges regarding Basel 
III. Particularly, MTB has a large portion of trust preferred securities in its 
capital structure which will wind down, a sizeable DTA and negative impacts from
its Bayview investment and private label MBS. However, this transaction should 
help in achieving the required minimum Tier 1 Common ratio plus countercyclical 
buffer in advance of required implementation dates.

Positive momentum could result as MTB continues to build capital up to peer 
averages while maintaining strong asset quality, reserves, and earnings. 
Although not anticipated, a more aggressive approach to capital management, or 
should MTB announce an acquisition in the near term that pressures current 
capital, negative rating action may follow. 

Fitch has affirmed the following ratings with a Stable Outlook:

M&T Bank Corporation
--Long-term IDR at 'A-';
--Short-term IDR at 'F1';
--Viability at 'a-';
--Preferred stock at 'BB';
--Support at '5'
--Support floor 'NF'.

Manufacturers and Traders Trust Co
--Long-term IDR at 'A-';
--Short-term IDR at 'F1';
--Viability at 'a-';
--Senior unsecured debt at 'A-';
--Subordinated debt at 'BBB+'
--Long-term deposits at 'A';
--Short-term deposits at 'F1';
--Support at '5';
--Support floor 'NF'.

Wilmington Trust, N.A. (formerly M&T Bank, NA)
--Long-term IDR at 'A-';
--Short-term IDR at 'F1';
--Viability at 'a-';
--Long-term deposits at 'A';
--Short-term deposits at 'F1';
--Support at '5';
--Support floor 'NF'.

Wilmington Trust Corporation
--Long-term IDR at 'A-';
--Subordinated debt at 'BBB+';
--Short-term IDR at 'F1';
--Viability at 'a-';
--Support at '5';
--Support floor at `NF'.

Wilmington Trust Company
--Long-term IDR at 'A-'; 
--Short-term IDR at 'F1';
--Viability at 'a-';
--Support at '5';
--Support floor at `NF'

M&T Capital Trust I - IV
--Preferred stock at 'BB+'

Provident Bankshares Corp.
--Preferred stock at 'BB'.

Provident Bank of Maryland
--Subordinated debt at 'BBB+'.

Provident (MD) Capital Trust I
--Preferred stock at 'BB+'.

Our Standards:The Thomson Reuters Trust Principles.
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