M&T Bank Maintaining Quality, But Lagging In Operating Performance

Investors in M&T Bank (MTB) generally appreciate the bank for its conservative approach, and that’s still a valid argument – particularly at this point in the credit cycle where credit costs are starting to rise. On the other hand, M&T doesn’t have a particularly attractive fee-generating business that can offset spread pressures, and the bank’s low-cost deposit base (an important positive over the full cycle) and asset sensitivity remain more problematic. What’s more, M&T’s recent misses at the opex line undermine one of the few areas banks can try to offset spread compression.

I wasn’t overly fond of the investment prospects of M&T last time I wrote about the stock, and the shares subsequently dropped more than 10% before a rally that has taken the price back into the $160’s. While management’s apparent incrementally greater willingness to consider M&A is arguably a positive, nothing much has changed on a fundamental basis. I don’t think M&T’s expense issues will prove long-lasting, but I also don’t see a particularly compelling valuation case here either.

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M&T Bank Maintaining Quality, But Lagging In Operating Performance