The New York-based bank, which has 650 branches across the US north-east coast, said the profits were 7% higher than in 2004 on the back of tight cost control and lower bad debt provisions. Earnings per share were 10% higher than in 2004, at $7.03.
For the final three months of 2005, the bank made profits of $205m, or $1.78 per share, just above analysts' earnings per share forecasts of $1.75 a share.
"Overall, M&T had another successful year in 2005. Improved credit quality, reflecting a continuation of our prudent underwriting standards, coupled with our success in containing expenses, were the leading forces behind M&T's strong financial performance," the bank said in a statement.
But it warned that given the challenging interest rate environment and a forecast of slow revenue growth, the company's interest rate margin narrowed during the year. The net interest margin - the difference between what the bank pays depositors and what it receives from borrowers - fell to 3.69% from 3.82%.
Chief financial officer Rene Jones said margin pressure should decrease if the Federal Reserve raises interest rates less in 2006.
The company's non-performing loans decreased to $156m from $172m, while loans and leases rose 5% to $40.3 billion, deposits rose 5% to $37.1bn and assets rose 4% to $55.1bn.
"It looks like a pretty solid quarter," said Jacqueline Reeves, an analyst at Ryan Beck & Co.
"Continued margin pressure was in line with their forecasts, and loan growth was reasonable. Expense control was terrific."
In early trading in New York, shares in M&T fell by just over 1.3%. They hit a record high on Tuesday. Ms Reeves said the drop in the share price may have resulted from M&T's failure to provide a full-year earnings forecast, as it had in the past.
Davy Stockbrokers said: "Management indicated on the conference call that they expect a continuation of low balance sheet/revenue growth this year, so the focus will remain on expense and bad debt containment as well as further share buybacks."
AIB, which is the largest shareholder in M&T, became an investor &when it sold its US business Allfirst to the bank just over three years ago.
AIB also announced yesterday that John O'Donnell, who has been with the bank since 1989, has taken over as group finance director from Gary Kennedy, who retired last week. Shares in AIB gained 1% yesterday to close at €18.13 on the Irish Stock Exchange.