August 17, 2012 / 8:10 PM / in 6 years

TEXT-S&P: M&T bank ratings unaffected by sale of TARP stock

Aug 17 - Standard & Poor's Ratings Services today said its ratings on M&T
Bank Corp. (A-/Stable/A-2) are unaffected by the modification and sale
by the U.S. Treasury of approximately $381.5 million of preferred stock that was
originally issued as part of the Troubled Asset Relief Program (TARP) in 2008.

We view the transaction as modestly positive to the ratings. We believe it 
removes some uncertainty related to M&T's longer-term plans for meeting 
expected Basel III capital requirements. It also bolsters M&T's risk-adjusted 
capital (RAC) ratio before diversification to approximately 7.25%, pro forma 
for first-quarter 2012. (Based on our criteria, we consider a RAC ratio of 
7%-10% to be "adequate.") However, in the medium term, we expect the 
transaction will be a net neutral to our expectations for the RAC ratio. We 
currently award equity credit to about $400 million of M&T's trust preferred 
securities (TRUPs). We will phase out equity credit for these TRUPs on a 
schedule mirroring proposed regulatory treatment.

We expect that the $381.5 million of preferred stock will retain Tier 1 
capital treatment according to expected regulatory capital guidelines, by 
virtue of the transaction structure (a modification of an existing issue, 
rather than a new issuance). The preferred stock will receive "intermediate" 
equity credit under our hybrid capital criteria (see "Bank Hybrid Capital 
Methodology And Assumptions," published Nov. 1, 2011). This will immediately 
boost our RAC ratio, since the TARP preferred stock had previously received 
"minimal" equity credit. 

We expect the company to sustain a RAC ratio of more than 7% over the next 
18-24 months as it accretes capital to meet expected Basel III capital 
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