M&T makes mark on city during its first year here

Outsider: A Buffalo banking company has lavished cash and civic deeds on Baltimore in an effort to woo its citizens.

April 04, 2004|By Paul Adams | Paul Adams,SUN STAFF

Determined to bail out Baltimore's nearly insolvent schools without state aid, Mayor Martin O'Malley picked up the phone early last month and called Eugene Sheehy, a top executive for the city's banker, M&T Bank Corp.

Virtually unknown to Marylanders before its $3.1 billion purchase of Allfirst Financial a year ago, the Buffalo, N.Y.-based bank answered the mayor's 11th-hour plea for assistance. Working on a Sunday, bank officials and the city's finance director put together the financial details of the mayor's go-it-alone plan to save city schools without help from state government. The City Council approved the $42 million rescue package the next night.

"That's how accessible they are," said O'Malley, whose "Believe" urban-renewal campaign was partially bankrolled by M&T. "I think all of us were worried that when the bank changed ownership that they would not be as active [in the community], and that has not materialized from my standpoint."

To many civic and business leaders, M&T began 2003 as a faceless, out-of-state bank parachuting in to take over another of Baltimore's influential financial companies. Many feared the loss of a corporate partner that had invested generously in civic projects. Others worried about the 1,132 former Allfirst employees who were slated to lose their jobs, including 657 in Maryland.

But in 12 months, M&T, which vaulted into the top 20 among U.S. banks with the purchase of Allfirst, has injected its brand into every corner of civic life while simultaneously cutting costs and squeezing more revenue out of its Maryland branches.

The bank poured millions of dollars into an image-building campaign that has included spending liberally on advertising.

M&T bought the naming rights to Ravens Stadium, contributed $1 million to the Hippodrome Theater revitalization, donated a $100,000 mobile stage for the mayor's "Believe" campaign and sprinkled company executives among local community boards and nonprofit charities.

"Here we were one of the largest banks in Maryland and nobody had ever heard of us," said Robert G. Wilmers, M&T's chairman and chief executive officer, commenting on the $75 million stadium deal and other brand-building efforts. "We had to do something, so when you put it all together, it made sense to do something dramatic."

Riskiest deal

Buying Allfirst, a division of Allied Irish Banks PLC, was Wilmers' largest and riskiest deal in more than 20 years of growth through acquisitions. In the years leading up to the purchase, Allfirst had struggled to increase market share, which remained flat to slightly lower despite tweaking by its Dublin-based parent. Its costs remained persistently high for a bank of its size, and revenue per employee fell far short of more efficient competitors.

Then in February 2002, Allfirst was scandalized when it was revealed that a rogue currency trader had covered up trading losses that reached $691.2 million.

The trader, John M. Rusnak, received a 7 1/2 -year prison sentence for perpetrating one of the biggest banking fraud scandals in history.

The fallout extended into the executive suite, resulting in a management overhaul and contributing to Allied Irish Banks' decision to retreat from a difficult U.S. market that many analysts in Europe had criticized it for entering in the first place. Allied Irish received a 22.5 percent stake in M&T as part of its deal to sell Allfirst.

M&T took over with a pledge to cut costs up to 20 percent by consolidating back-office operations and eliminating duplicate administrative positions. Today, Wilmers said, the bank has met its goal of extracting $100 million in cost savings.

While hundreds of positions were eliminated in Maryland, others were moved to Baltimore as the bank sought to capitalize on some of Allfirst's strengths. The Buffalo bank's mutual-fund business was consolidated in Baltimore and boasted a 54 percent year-over-year increase in revenue.

The international trade business line also was consolidated in Maryland, and the business-lending unit hired about 29 new bankers, bringing the total to 45. Since October, the bank has seen a 25-percent increase in such loans, bank officials said.

Today, M&T says it has 2,394 employees in Maryland, compared with 2,624 on April 1, 2003, the day the Allfirst acquisition became official.

The bank reported 2003 net income of $573.9 million, or $4.95 per share, compared with $456.8 million, or $4.78 per share, in 2002. But some of the improved performance can be attributed to an economic recovery that boosted loans and deposits for banks nationwide.

`Hit floor running'

"What I am hearing is that most of the competition feels M&T has hit the floor running and has been a more aggressive competitor than Allfirst," said Arnold G. Danielson, a Rockville banking consultant.

Some competitors acknowledge that business has moved around since M&T arrived on the scene. But it's difficult to tell how much of that is just normal turnover.

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