M&T profits up 39% to $184m

M&T BANK, the American regional bank in which AIB has a 22.5% stake, said it was on course to meet full-year expectations after it delivered profits of $184 million (€150m), a 39% increase on the same period last year.

The results were flattered by an adjustment relating to a mortgage securitisation programme that added $13m to the bottom line, but were still ahead of most analysts’ expectations.

Earnings per share came in at $1.53, ahead of the consensus estimate of $1.45.

Income for the first half of the year was ahead by 37% year-on-year and totalled $344m. But $25m of the $93m increase in income was due to the non-recurrence of once-off charges relating to the integration of AIB’s troubled Allfirst subsidiary into the M&T group.

Chief financial officer Michael Pinto said the results reflected continuing strong loan quality and loan growth was encouraging.

Mr Pinto said revenues from residential mortgages fell “significantly” but predicted the bank would meet its full-year targets.

NCB analyst David Odlum said the bank’s strong asset quality was good news and the market would be relieved with the results after earlier negative signs from other banks in the region. Mr Odlum added that the bank’s commercial lending operations had performed well and made up for a slowdown in consumer lending. But interest margins had remained stable in spite of competitive pressure and the bank had also managed costs well during the quarter, he said.

AIB took a stake in M&T last year after agreeing a deal with the bank to offload Allfirst, AIB’s infamous subsidiary where rogue trader John Rusnack racked up losses of almost $700m. The stake is worth approximately €2 billion and accounts for approximately one-sixth of AIB’s market capitalisation. The bank is one of the 20 largest in America and has over 700 branches in the north-eastern states of New York, Pennsylvania, Maryland and Virginia and in the city of Washington, DC. Analysts expect AIB to dispose of its stake in M&T in the medium term for strategic reasons.

M&T shares were up 17c to $87.90 in early yesterday, but remain almost 15% of their value at the beginning of the year. The bank disappointed investors with its first quarter results but is expected to deliver full-year profits of between $5.90 and $6.10, up from $4.95 last year.