A Little More On Santander And M&T Bank

Just a quick little follow-up on the rumor of a get-together between Spain's Santander (NYSE: SAN) and super-regional M&T Bank (NYSE: MTB).

There was news a couple of days ago that Santander was looking to restart talks with M&T management about the possibility of a deal. If the news reports are accurate, the problem is pretty fundamental - M&T does not want to sell and/or give up control to Santander. Given the history of the M&T, the long tenure of senior management, the significant employee ownership, and the whole culture of the bank (as best an outsider like myself can sense), this is not really a surprise.

In other words, Santander is probably welcome to buy Allied Irish Bank's (NYSE: AIB) stake in M&T, but Santander will be expected to operate under similar strictures as AIB - namely, can you offer some suggestions and we won't dilute your interests, but we're not interested in being your subsidiary.

If Santander pushes the matter, they likely will fail. About 20% of M&T is owned by employees, another 5% by Berkshire Hathaway (NYSE: BRK-A), and the 22% or so held by AIB. Assuming AIB has the option to side with M&T management, it is pretty much a non-starter for Santander, and I have to imagine that AIB has other options to monetize their stake if they really wish to pursue them (in other words, I don't think AIB turns over on M&T to make a buck).

I still think Santander is a decent suitor at the right price; I don't think they will ruin M&T and I think there's a fair chance that they would put M&T at the head of their US operations (maybe to the detriment of US-based, Santander-owned Sovereign Bancorp). All in all, Santander is a very good bank and while it may not have quite the same culture as M&T, Santander's relative conservatism has helped them muddle through this credit crisis better than most.

What if the deal doesn't happen? M&T will pretty much continue on as before, growing at a modest organic pace and perhaps considering strategic deals here and there. Santander, though, is not likely to quit. Whether they would look to go large (say, Suntrust (NYSE: STI) or PNC (NYSE: PNC)) or more moderate (deals the size of Fifth Third (Nasdaq: FITB) or Comerica (NYSE: CMA), for instance), I don't think Santander is done building its U.S. business just yet.