M&T Bank Corporation

MTB Details

M&T Bank Corporation (NYSE: MTB) operates as a bank holding company. The company's reportable segments include Business Banking (for small businesses and professionals), Commercial Banking (for middle market and large commercial customers), Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking, and Retail Banking. As of February 22, 2020, MTB has 716 domestic offices across the US. As of June 24, 2021, the company’s market capitalization stood at USD 18.86 billion.

Offering Access to New Capabilities: On June 23, 2021, the company launched Wilmington Advisors @ M&T, a brand that offers holistic and personalized securities, advisory, retail brokerage, and insurance services to individuals, families, and non-profit organizations through its relationship with LPL Financial. Also, on June 15, 2021, MTB collaborated with MagnusCards by Magnusmode to create a new digital guide to provide visual cues and step-by-step instructions of fundamental banking services to help people with cognitive and intellectual disabilities. MTB’s digital "Card Decks" will be available through the MagnusCards app and will be offered free to users.

Creating Super-Regional Banking Franchise: On February 22, 2021, MTB signed an agreement to acquire People's United Financial, Inc. (PBCT) in an all-stock transaction valued at USD 7.6 billion (based on the closing price on February 19, 2020). The combined company will have ~USD 200.0 billion in assets and a network of more than 1,100 branches spanning 12 US states in the Northeast and Mid-Atlantic regions. Upon completion, each outstanding PBCT share will be exchanged for 0.118 shares of MTB, with PBCT shareholders collectively owning ~28% of the combined company. The merger is expected to close in Q4FY21.

Combined US Footprint (Source: MTB-PBCT Merger Presentation, February 22, 2021)

Q1FY21 Results:  Net interest income ticked up 0.33% to USD 985.13 million in Q1FY21 (ending March 31, 2021) from USD 981.87 million in Q1FY20. Net income for Q1FY21 was USD 447.25 million, up 66.37% from USD 268.82 million reported in Q1FY20. Total deposits increased to USD 128.5 billion as of March 31, 2021, from USD 119.8 billion at FY20 end.

Key Risks: The majority of the company’s core banking business is concentrated within its Retail Banking segment in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia, and D.C. Hence, adverse changes in economic conditions in the Northeast and Mid-Atlantic regions could impact MTB’s financial conditions. In addition, MTB is subject to extensive federal and state regulations focused on protecting consumers, depositors, and the financial system. These regulations can affect the company’s lending practices, capital structure and, growth.

Outlook:

Combined FY22E Guidance (Source: MTB-PBCT Merger Presentation, February 22, 2021)

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MTB Daily Technical Chart

Stock Recommendation: MTB stock surged 18.32% and 64.17% in the past 6 and 9 months, respectively, and is currently leaning towards the higher end of the 52-week range of USD 88.48 to USD 168.27. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 39.04. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 157.95. Considering the consistent uptick in the stock price, various growth initiatives, and current valuation, we recommend a “Watch” rating on the stock at the closing price of USD 147.85, up 0.84% as of June 24, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.