DBRS Confirms M&T Bank Corporation at A (low); Revises Trend to Positive

DBRS, Inc. (DBRS) has today confirmed the ratings of M&T Bank Corporation (M&T or the Company) and its rated subsidiaries, including M&T’s Issuer & Senior Debt rating of A (low). At the same time, DBRS has revised the trend for all ratings to Positive from Stable, with the exception of M&T Bank Corporation’s and Wilmington Trust Corporation’s Short-Term Instruments rating, which remains Stable. The Intrinsic Assessment (IA) for Manufacturers and Traders Trust Company (M&T Bank or the Bank) is “A”, while the Support Assessment remains SA1. The Company’s Support Assessment is also SA3 and its Issuer & Senior Debt rating is positioned one notch below the Bank’s IA.

M&T’s ratings are underpinned by its deeply entrenched commercial banking franchise throughout the Northeast and Mid-Atlantic region, which includes the number two deposit market share position in Maryland, number three position in Delaware, number six position in New Jersey, number seven position in New York, and the number ten position in Pennsylvania. The confirmation and Positive trend considers the Company’s consistent above peer median financial performance, particularly during times of stress, as well as its conservative risk management culture, which has resulted in superior credit quality through-the-cycle. Additionally, M&T maintains an ample funding and liquidity profile, and its capital position, once considered a rating constraint, stands at the top end of its regional bank peer group. Lastly, DBRS expects that the Company’s Written Agreement with the Federal Reserve Bank of New York (signed June 17, 2013) related to weaknesses found in its BSA/AML compliance programs will be lifted in the near to intermediate term, allowing M&T to consider acquisitions again, which has been an important part of its growth and enhanced franchise strength over the long-term.

M&T’s earnings power remains resilient, supported by a diverse set of business, which provides stability to the bottom line. For 2016, the Company generated $1.3 billion of net income, an increase of 22% versus the prior year, reflecting the full-year impact of the Hudson City acquisition (completed on 11/1/15). Overall, M&T reported a return on average assets of 1.06%, stable compared to 2015, and still comparatively favorable result, given the challenging operating environment. DBRS notes that the Company’s expenses remain well-contained, consistent with historical trends.

Meanwhile, M&T’s asset quality remains strong with manageable levels of non-accrual loans and very low net charge-offs. DBRS notes that the Company’s CRE concentration remains high at 37% of total loans, with a significant component located in New York City. Nonetheless, the portfolio has performed relatively well through numerous credit cycles.

The Company’s other balance sheet fundamentals remain solid, including its funding and liquidity, which is underpinned by a sizable deposit base and high quality securities portfolio. With a CET1 ratio of 10.7% at year-end, M&T’s capital position remains sound, despite continued capital management activity.

Headquartered in Buffalo, New York, M&T Bank Corporation reported $123 billion in consolidated assets as of December 31, 2016.

RATING DRIVERS
Sustained above peer median financial performance, while maintaining sound balance sheet fundamentals could result in positive rating actions. Conversely, ratings could come under pressure if M&T reflects a sustained level of credit deterioration, or material decrease in core earnings.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations (July 2016), DBRS Criteria – Support Assessments for Banks and Banking Organisations (March 2016) and DBRS Criteria - Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2017), which can be found on our website under Methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Michael McTamney, Vice President – Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director – Global FIG
Initial Rating Date: 14 July 2005
Last Rating Date: 4 February 2016

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.