Janney lowers M&T earnings estimate
* Cite new delay of merger with Hudson City
Regional bank analysts at Janney Capital Markets on Tuesday lowered their earnings estimates for M&T Bank Corp., citing the latest delay of the Buffalo commercial bank’s merger with Paramus-based Hudson City Bancorp Inc.
“We had previously expected the merger to close at the end of the first quarter of 2015,” wrote analysts Sameer Gokhale and Owen Lau in their first-quarter outlook on regional banks. “However, we are now assuming that the deal will close at the end of the second quarter of 2015.”
Janney’s analysts also said in the report that they expect the closing date of the Hudson City deal to be “a key discussion point” in M&T’s earnings conference call scheduled for 11 a.m. on Monday.
The Hudson City deal would give M&T nearly 100 retail bank branches in New Jersey, where it currently has none, and make it one of the top 10 deposit holders in the state. The companies said last week that the Federal Reserve Board had advised M&T that it would not act on M&T’s merger application before an April 30 deadline, after which either company could terminate the merger agreement. It is the fourth time the deal has been delayed since it was announced in August 2012, when it was valued at $3.7 billion.
Although no reason was given for the latest delay, M&T has said in the past that it had to address the Federal Reserve’s concerns about the strength of its anti-money-laundering defenses.
No new deadline was set by the banks for completion of what would be one of the largest bank mergers since the financial crisis.
Gokhale and Lau lowered their first-quarter earnings estimate for M&T to $1.79 a share from $1.86, and they adjusted their year-end total earnings per-share projection to $8.37 from $8.69.
M&T’s net interest income for the quarter is expected to decline by $30 million from the $452 million reported in fourth quarter of 2014, as the margin on lending is projected to shrink to 3.05 percent from 3.1 percent, the Janney report said.
Loans are expected to increase 5.1 percent year-over-year, “driven by growth in commercial loans,” the report said.
Operating expenses are projected to decline by $12 million compared with the fourth quarter of 2014, in part because of lower costs related to Bank Secrecy Act and anti-money-laundering compliance.
Gokhale and Lau put “neutral” ratings on M&T, BB&T Corp., Comerica Inc. and Huntington Bancshares Inc.
They gave “buy” ratings to Fifth Third Bancorp, KeyCorp, People’s United Financial Inc. and Regions Financial Corp.
