M&T; Bank Corp. reported a 41 percent increase in fourth-quarter profit yesterday as its $3.1 billion purchase of Baltimore-based Allfirst Financial Inc. took hold.
But the results fell short of analysts' expectations, and the Buffalo, N.Y.-based bank's shares fell $1.88 to $92.99 in trading yesterday.
Expectations for the bank have been high since the merger, which vaulted M&T; into the top 20 among U.S. banks and punctuated Allfirst's fall from grace after it announced in February 2002 that a rogue currency trader in Baltimore had hidden $691.2 million in trading losses over a period of five years.
The stunning revelations resulted in several high-profile departures at the bank and ultimately led Allfirst parent Allied Irish Banks PLC to sell the operation.
M&T; officials added momentum to yesterday's drop in share price with a cautious assessment of the year ahead in a morning conference call with analysts. Michael P. Pinto, M&T;'s chief financial officer, said it is not yet clear whether the economy has recovered.
"I think it's becoming increasingly difficult to predict what's happening in the economy," Pinto said. "The unemployment numbers on Friday were a good indicator of that. As you know, job growth was very subdued."
The bank's fourth-quarter net income grew to $166.9 million, or $1.35 per share, compared with $118.6 million, or $1.25 per share, in the fourth quarter of 2002. Analysts had expected earnings of $1.40 per share, according to Thomson Financial.
M&T; said it doesn't expect to gain any additional cost savings from its April acquisition of Allfirst, which added $10.3 billion to the bank's loan portfolio. The merger cost about 657 jobs in Maryland as M&T; sought efficiencies in the Baltimore operation. The bank took a $2 million charge in the fourth quarter for merger-related expenses, which totaled $39 million in all of 2003.
Net interest income in the quarter was $425.5 million, up 31 percent from $325.2 million in fourth-quarter 2002. The bank's net interest margin - the difference between the interest it charges on loans and the interest it pays on deposits - fell to 3.96 percent from 4.28 percent in fourth-quarter 2002.
For the year, M&T; reported net income of $573.9 million, or $4.95 per share, compared with $456.8 million, or $4.78 per share, posted for 2002.
"The outlook was OK, but I think the market was expecting a little more," said Erik Eisenstein, a senior industry analyst with Standard & Poor's.
Eisenstein said that although the merger with Allfirst elevated M&T;'s status, the bank continues to be slightly overvalued for a regional institution. He is forecasting 2004 earnings per share of $5.98.
In yesterday's conference call, bank officials said they expect earnings to fall between $5.90 and $6.10 per share. The average analyst estimate was for earnings of $6.07 per share for 2004.