Hudson City deal getting sweeter for M&T says Citi

M&T's (MTB -1.4%) purchase of Hudson City Bancorp (HCBK -1.2%) - first announced in August 2012 - has been stuck in a regulatory morass, with D.C. insisting M&T beef up its money-laundering compliance before approval is granted.

The numbers that day in August assumed an 18% IRR on the purchase for M&T, but updating his team's model, Citi's Keith Horowitz calculates it to be closer to 20% thanks to the increase in M&T's stock price and Hudson City's better position today - its quarterly expense run rate in 13% lower, the balance sheet is 11% smaller which offsets the higher deal cost by improving the capital ratio. Horowitz expects the deal to add 3% to M&T's EPS, improving to 7% within a couple of years.

Horowitz, however, rates M&T at just a Neutral given the risks to the stock due to its premium valuation - it trades at 4.1x tangible book vs. a "normal" of 2.5x.

Comments (1)
  • donbcms
    , contributor
    Comments (38) | Send Message
    To H__L with HCBK Hermance's NO BID Merger with M&T; AND HIS "Golden Parachute"?? See WHO else might want ALL those NJ Branches; after all M&T don't have ANY in NJ?? HCBK HAD a great reputation; try WFC, JP, ?? M&T gets a "Goldmine"; HCBK Stockholders get the "SHAFT"??
    22 Mar 2014, 10:43 PM Reply Like
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