The new owner of Allfirst gets bigger footprint

M&T becomes No. 2 bank in state, No. 5 in region

Acquisition makes it `a force'

But lackluster local firm may prove to be challenge

October 06, 2002|By Bill Atkinson | Bill Atkinson,SUN STAFF

M&T Bank Corp.'s acquisition of Allfirst Financial Inc. will catapult the now relatively unknown Buffalo, N.Y., company into the top ranks of banking not only in Maryland, but also in the region.

M&T executives plan to build a powerful division here encompassing Maryland, Pennsylvania and possibly the Washington area that will be run out of Baltimore under Allfirst banking executive Eugene C. Sheehy.

Sheehy was installed as Allfirst's chairman by its parent, Allied Irish Banks PLC of Dublin, Ireland, after Allfirst revealed in February that it had lost $691.2 million in a currency trading scandal.

Late last month, M&T agreed to buy Allfirst for $3.1 billion in cash and stock. Sheehy will become chairman and chief executive of M&T's Maryland and Pennsylvania division when the deal becomes final early next year.

And M&T will give him the autonomy to run the division as he sees fit, the bank's No. 2 executive said.

"The simple answer is, he [Sheehy] is in charge," said Robert E. Sadler Jr., M&T Bank's president, who noted that Sheehy will report to him. "He is in charge of the operation. We have to have the decision-making authority on the ground if we are to be competitive."

Once the acquisition is completed, Sheehy will oversee an operation that will be much larger than Allfirst, stretching throughout Maryland and Pennsylvania. He might also be in charge of much smaller operations in Washington, Virginia and West Virginia.

The bank will rank as the region's fifth-largest with $17.6 billion in deposits, 450 branches and a 4.9 percent market share. It will be the second largest in Maryland with 12.76 percent of the market, and the biggest in Baltimore with 18.82 percent of the market, according to SNL Financial in Charlottesville, Va.

"There is no doubt [acquiring Allfirst] makes them a force," said Richard McCaffery, a bank analyst at Morningstar Inc., a Chicago research firm. "The really attractive thing is that they get into Maryland ... in a big way. Maryland gives them some real room to spread their wings."

Added Collyn Bement Gilbert, a banking analyst at Ryan Beck & Co., M&T "will be tough competition. Allfirst ... gives them a good footprint."

Allfirst also becomes part of a larger U.S. banking company that already has $31.7 billion in assets and about 450 branches in New York, Pennsylvania, Maryland and West Virginia. M&T is very profitable, well managed and admired by industry followers. Its largest shareholder is Berkshire Hathaway Inc., the investment firm headed by investor Warren E. Buffett, a friend of Robert G. Wilmers, M&T's chairman and chief executive.

Once the acquisition is completed, M&T will be the country's 18th-largest bank with $49 billion in assets and more than 700 branches. The Allfirst name, which has been tarnished by the scandal, will disappear and become Manufacturers and Traders Trust Co., M&T's lead bank.

But in acquiring Allfirst, M&T faces a number of challenges. One of the biggest is whether it can turn what analysts describe as a lackluster performer into a money-making force.

Allfirst's assets, deposits and loans were flat, even as the economy boomed, and its 1997 acquisition of Harrisburg, Pa.-based Dauphin Deposit Corp. never produced the growth anticipated, analysts said.

Some experts believe M&T has the track record, but it will still take plenty of work.

"Does this give them [M&T] more critical mass, which is important? Yes, I do think they become a force," said Charles W. Cole Jr., chairman and chief executive of Legg Mason Trust and former president and chief executive of First Maryland Bancorp, predecessor of Allfirst.

"Quantity isn't the whole answer. For a large financial institution to be successful in a marketplace, it must be staffed by a team of talented, knowledgeable bankers that know the region," Cole said.

M&T will compete against some of the nation's biggest banks that have been in Baltimore for years and have hired local bankers who are heavily involved in the community and whose connections help drum up business.

It will also face the two remaining large independent banks, Mercantile Bankshares Corp. and Provident Bankshares Corp., which have loyal followings and have been in Baltimore since the 1800s.

Last week, SunTrust Banks Inc. of Atlanta hired Donald P. Hutchinson to head its Maryland division. Hutchinson, a former Baltimore County executive and president of the Greater Baltimore Committee, will oversee an expansion of the bank's Baltimore operations, which could include acquisitions.

Bank of America, the largest bank in the state, Wachovia Bank and BB&T all have sizable stakes in the region with local bankers at the helm.

Unlike the other bankers, Sheehy moved to Baltimore recently from Ireland, where he was an executive at Allied Irish. Since Allied will hold a 22.5 percent stake in M&T when the deal is completed, some believe Sheehy's tenure here will be limited.

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