Shares in bank part-owned by AIB set to jump

SHARES in US-based M&T Bank Corp – 22.64% owned by AIB – are set to jump, accordingto the latest edition of Barron’s.

M&T Bank has a market capitalisation of $6.895 billion (€4.8bn) which values AIB’s stake at €1bn – roughly half of AIB’s market cap of €2.174bn.

M&T Bank has been bruised by the mortgage market crisis, but its shares may jump as the large US mid-Atlantic regional bank looks set to emerge from the crisis with greater market share, according to Barron’s.

M&T Bank Corp, whose shareholders also includes Warren Buffett’s Berkshire Hathaway Inc with a 5.7% holding, may rise once the economy improves, Barron’s reported, citing Sara Hasan, an analyst at McAdams Wright Ragen in Seattle.

Traditionally conservative M&T was burned by investments in the mortgage market and its shares are dogged by worries the Irish government, which bailed out the bank, will force a sale of AIB’s 22% stake.

“We’ve made our mistakes, but we feel we have them well under control,” Barron’s quoted the bank’s chief executive, Robert Wilmers, as saying.

“If Wilmers is right, there’s upside in the shares,” Barron’s said in its September 7 edition. The bank has proven in the past its “old fashioned community banking services” can boost market share, and new, smaller-scale clients may emerge as the larger banks focus on their bigger borrowers, it said.

“M&T Bank knows how to prosper in tough times,” it said, adding shares of the Buffalo, New York-based bank are trading well below their usual ratio.

Earnings of M&T Bank may increase 40% to $3.22 a share in 2010, from $2.29 this year, the weekly newspaper said, citing analysts’ consensus estimates.

Investor uncertainty for the banking industry may offer an “opportunity to own a conservatively managed, consistently profitable institution at a significant discount to its historic valuation”, Ms Hasan said.

Barron’s didn’t say whether Ms Hasan, whose target price is $112, owns the shares. The share price opened at $58.46 yesterday. The shares have increased 1.8% this year.


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