M&T profit rose 26% in 3rd quarter

New Allfirst parent falls just short of expectations

October 10, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

M&T Bank Corp., which agreed last month to buy Baltimore's Allfirst Financial Inc. for $3.1 billion, said yesterday that its earnings rose 26 percent in the third quarter but fell short of expectations because of loan write-offs and charges from its mortgage-servicing business.

The Buffalo, N.Y.-based company wrote-off $36 million in bad loans in the quarter, including $17 million for two leases to an unidentified airline company that filed for bankruptcy.

M&T took a $16 million charge because of lower residential mortgage servicing fees. But its consumer loan portfolio continued to grow - by 29 percent to $1.4 billion - as consumers took advantage of low-cost loans.

The charges caused M&T to miss earnings estimates by 4 cents a share in the quarter that ended Sept. 30. Wall Street analysts had expected diluted earnings per share of $1.27.

Instead, M&T posted earnings per share of $1.23 in the quarter, up 26 percent from 98 cents in the third quarter last year.

"We missed because of the credit write-down and the servicing write-down," said Michael S. Piemonte, M&T's senior vice president of corporate finance and investor relations. "We fully expect to more than make it up in the next quarter."

Shares of M&T fell $5.40, or nearly 7.4 percent, to close at $68 on the New York Stock Exchange.

M&T's cash net income climbed $125 million, or 1 percent, from $124 million in last year's third quarter. Its net interest income, or profit from loans, rose 7 percent to $315.2 million from $294.3 million in the third quarter last year.

The Allfirst deal, which was announced Sept. 26, was not factored into M&T's quarterly results, and company executives did not discuss it yesterday during a conference call with analysts.

But M&T previously had given some guidance on how the merger will progress.

In the first full year after the acquisition, M&T expects to reduce Allfirst's expenses by 17.4 percent, or $101 million. It expects $37.3 million in savings from technology and operations, $28.4 million from corporate overhead, $27 million through business-line consolidation and $8.3 million from facilities.

M&T is acquiring Allfirst from Allied Irish Banks PLC of Dublin, Ireland, which gains a 22.5 percent stake in the purchaser.

The deal would make M&T the country's 18th-largest banking company, with $49 billion in assets and more than 700 branches in six Northeastern states and Washington. The deal is expected to close during the first quarter of next year.

The merger will do away with the Allfirst bank's name, which was tarnished by a currency trading scandal that cost the company $691.2 million. The bank is to become Manufacturers and Traders Trust Co., named for M&T's lead bank.

Piemonte said it is too early to say how many Allfirst employees would be affected by the merger.

Robert S. Patten, a banking analyst with UBS Warburg in New York City, said he continues to have a "buy" rating on M&T's stock after yesterday's earnings report.

"The overall fundamentals remain intact," he said, adding that he expected M&T to handle the merger with Allfirst well.

Sun staff writer Bill Atkinson contributed to this article.

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