M&T Seals Wilmington Trust Deal

| About: M&T Bank (MTB)

Yesterday, M&T Bank Corporation (NYSE:MTB) announced the completion of the Wilmington Trust Corporation’s acquisition. The deal added 55 branch locations, 225 ATMs and $10.7 billion in assets to M&T.

M&T now has approximately $78 billion in assets, 780 retail and commercial branches, and 2,000 ATMs in New York, Pennsylvania, Maryland, Virginia, West Virginia, New Jersey, Delaware, Florida, the District of Columbia and Ontario, Canada. The company also offers wealth management services with approximately $81 billion of assets under management.

The Wilmington Trust merger, which was announced last November, received Wilmington’s shareholder approval this March. Last week, M&T also announced that it had received all regulatory approvals needed to materialize the acquisition.

According to the merger agreement, shareholders of Wilmington Trust are receiving 0.051372 shares of M&T common stock in exchange for each share of Wilmington Trust common stock they own.

Following the closure of this acquisition, all Wilmington Trust bank customer accounts became M&T Bank accounts. However, the Wilmington Trust bank branches and ATMs will continue to bear the Wilmington Trust name until the completion of a systems conversion. Currently, M&T expects to accomplish the conversion during the third quarter.

Our Take

The financial crisis created significant opportunities for M&T to expand its business.Soaring loan losses plagued Wilmington, which ultimately decided to sell itself. However, Wilmington Trust is an attractive buy for M&T owing to the strong corporate trust and wealth advisory businesses of the former.

Other strategic acquisitions such as Provident and Bradford acquisitions in the Mid-Atlantic region have proved meaningful, both in terms of customer base and profitability. Recently, the company also purchased K Bank, Randallstown, Maryland through an FDIC assisted deal. This deal will help the company to expand its network in the Mid-Atlantic region.

In fact, consolidation has become an industry norm. The failure of Washington Mutual in 2008 was the largest in the U.S. banking history. It was acquired by JPMorgan Chase & Co. (NYSE:JPM). The other major acquirer of failed institutions includes Wells Fargo & Co. (NYSE:WFC) and U.S. Bancorp (USB).

M&T managed to deliver solid quarters even during the financial crisis and continues to enjoy growth in net interest margin. A sound capital position with a growing core deposit should benefit the bank in the long run.

The merger of Wilmington Trust is also projected to be accretive to the company’s earnings in 2012. Headwinds related to credit quality have also lessened. Yet, a sluggish economic recovery and regulatory headwinds remain concerns.

M&T shares are maintaining a Zacks #3 Rank, which translates into a short-term Hold recommendation.