On Mar 12, 2015, we issued an updated research report on M&T Bank Corporation MTB. Shares of this major regional bank have recorded a one-year return of 9.5%.

We believe this growth story has been aided by the company’s continued focus on organic growth among several other positives including a strong capital position, steady capital deployment activities and an improving credit quality.

We view M&T Bank as an adequately capitalized bank. In Mar 2015, following the release of the Federal Reserve’s Dodd-Frank Act supervisory stress test 2015 (DFAST 2015) results, the company received no objection to the capital distributions reflected in its 2015 Capital Plan. Significantly, it is the only commercial bank in the S&P 500, which has not slashed dividend or executed dilutive equity offering during the financial crisis.

M&T Bank is focused on acquiring the industry's best deposit franchise. In 2014, deposits recorded a 5-year CAGR of 10.3% (2010–2014), aided by rising savings and non-interest-bearing deposits. Therefore, deposit balances are poised to grow in an improving economy.

Given its robust liquidity position, M&T Bank is well positioned to grow via acquisitions. The growth has been reflected in the company’s accomplishment of several major acquisitions in and out of the U.S in the last several years.

The Hudson City Bancorp, Inc. HCBK deal, though delayed, is expected to open up significant opportunities for M&T to augment its top line by leveraging on Hudson City’s retail network as well as product and balance sheet diversification and expanding its franchise in eastern U.S.

However, with continuously rising non-interest operating expenses, the company is exposed to operational risks. Expenses surged at a CAGR of 9.4% over the last five years (2010–2014). Continuation of such a trend will remain a hindrance for bottom-line growth. Notably, seasonal increase in salaries and benefits is anticipated in the first quarter of 2015, primarily reflecting annual equity incentive compensation and other expenses.

Management expects continued pressure on pricing and structures in the commercial real estate portfolio. Further, it continues to expect modest ongoing core compression and net interest margin to be lower by about 3-4 basis points per quarter. Management also forecasts low single-digit growth in fee revenues.

Further, the Zacks Consensus Estimate over the past 30 days decreased 1.1% to $8.40 for 2015, while it declined slightly to $9.62 for 2016. M&T Bank currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better-ranked major regional banks worth considering include Citigroup Inc. C and Northern Trust Corp. NTRS, both with a Zacks Rank #2 (Buy).

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