M&T Bank Corporation (NYSE: MTB) is a bank with principal offices located in Buffalo, New York and branches across New York, Pennsylvania, Maryland, Delaware, New Jersey, Virginia, West Virginia, Washington D.C. and the Cayman Islands. M&T offers a variety of financial services (i.e. loans, leases, checking services, deposits) to consumers, businesses, institutional clients, government organizations and financial firms. M&T makes most of its money from its lending operations, which are focused mainly on consumers and small and medium sized businesses within New York, PA, MD, VA, and Washington D.C. Its operations are divided into the segments Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking, and Retail Banking.
For the fiscal year 2010, M&T earned net income of $736 million, a 94% increase from the previous year. This increase was driven primarily by a higher net interest income and lower credit costs. The bank earned $2.3 billion in net interest income, a 10% increase from 2009.
As loaning is a large part of the bank's operations, it has high exposure to credit risk, and relies on accurately predicting how well its customers will repay their loans. The corporation must maintain proactive credit risk management and constantly weigh ongoing economic factors--should they overestimate its customers' ability to repay loans, the bank's overall performance will suffer.
Changes in interest rates inversely affect a bank's net interest margin — the difference between the yield the bank earns on assets and the interest rate it pays for deposits and other sources of funding. Interest rate fluctuations, such as in the Federal Funds Rate (the rate at which financial institutions lend federal funds to other depository institutions) and Prime Rate (rate at which banks lend to their highest-credited consumers) affect bank products such as loans, deposits, securities, and short-term lending. As interest rates rise, banks are forced to pay higher rates on deposits and other interest bearing accounts. Meanwhile consumer demand for mortgages and other loan products diminishes as borrowing becomes more expensive. The combination of these two effects reduces both the volume of loans and the profitability of each loan. Rising interest rates also have the potential to increase a bank's defaults as holders of adjustable rate mortgages find themselves unable to meet their obligations.
|2008 Financial Comparison||M&T Bank (MTB)||U.S. Bancorp (USB)||Sovereign Bancorp (SOV)||Regions Financial Corporation (RF)||BB&T (BBT)||Bank of America (BAC)||Wells Fargo (WFC)|
|Net Interest Income $Mil||1,939.8||7,866.00||11,112.00||6,562.40||7,207.00||85,684.0||34,898.00|
|Provision for Loan Losses $Mil||412.00||3,096.00||5,101.00||2,057.00||1,445.00||26,825.00||15,979.00|
|Net Income $Mil||555.90||2,946.00||(46.00)||(5,595.80)||1,519.00||4,008.00||2,655.00|
|Q4 2008 Net Income $Mil||102.20||330.00||(1,421.60)||(6,218.30)||305.00||(1,789.00)||(2,734.00)|
|TARP Funding $Bil||6.6||3.6||3.5||3.1||45.0||25.0|
|Price to Book||0.89||1.08||0.15||0.14||0.52||0.14||1.02|
|Price to Book Compared to Industry Average (0.75)||+0.14||+0.33||-0.60||-0.61||-0.23||-0.61||+0.27|