After Allfirst Buy, M&T Winning Regional Respect

By Stoneman, Bill | American Banker, August 10, 2004 | Go to article overview

After Allfirst Buy, M&T Winning Regional Respect


Stoneman, Bill, American Banker


Community bankers like to gloat about how much retail business they pick up after big banks in their market merge.

But more than a year after M&T Bank Corp. of Buffalo bought Allfirst Financial Inc. of Baltimore from Allied Irish Banks PLC of Dublin, some Maryland community bankers are singing a different tune.

"They've really shown they can be a strong competitor," said John A. Bond Jr., the chairman and chief executive officer of the $1.1 billion-asset Columbia Bancorp in Columbia, Md.

M&T, which bought Allfirst in April 2003 for nearly $3 billion, appears to have avoided the kind of mistakes that often disrupt customer relationships and thereby plague many bank deals, experts say.

The lack of bragging by smaller competitors may be the strongest sign that M&T is making effective use of the $17.3 billion-asset Allfirst business and its 262 branches in Maryland, Pennsylvania, Delaware, Virginia, and the District of Columbia.

Another sign is M&T's claim that it was ahead of schedule with its promised Allfirst cost cuts. The Allfirst franchise added 4 cents per share to earnings last year and 6 cents in the first quarter. (Second quarter figures were not available at press time.)

Most important, M&T has begun to win business in its new markets, according to Atwood Collins 3d, the M&T veteran who moved to Baltimore to lead the former Allfirst.

Mark T. Fitzgibbon, a co-director of equity research with Sandler O'Neill & Partners LP, said morale is good among M&T's small-business and middle-market calling officers in the area. "I think these people feel terrific about being part of the M&T organization," Mr. Fitzgibbon said.

Allied Irish, which received a 22.5% stake in M&T, is pleased with the transaction, according to Declan McSweeney, its chief financial officer. M&T brought more retail banking skill than Allfirst had, he said, and he expects good earnings growth in the year ahead.

Moving into regions that are growing faster than places like Syracuse, N.Y., and Harrisburg, Pa., is a welcome development for M&T. Still, whether it can really boost revenue in the markets formerly served by Allfirst and sustain growth remains to be seen.

M&T had one of the strongest long-term earnings and share price growth records in the industry while mostly operating in slow-growing upstate New York. But facing off against Bank of America Corp., Wachovia Corp., BB&T Corp., and SunTrust Banks Inc., and local stalwarts Mercantile Bankshares Corp. and Provident Bankshares Corp., could be different, said one long-time observer of the Maryland banking market.

The New York company bought into the Baltimore market with so much market share that "I don't think they're going to be able to increase revenue easily even if they do a good job," said Arnold G. Danielson, the chairman of Danielson Associates Inc., a Rockville, Md., investment banking company that focuses on banks.

M&T had 14.5% of deposits in the Baltimore metropolitan statistical area as of June 30, 2003, trailing only B of A's 20.3%, according to the most recent Federal Deposit Insurance Corp. figures available. Allfirst had 18.8% in June 2001, before reports emerged about $691 million in currency trading losses incurred over four years.

Taking market share from existing players will be difficult, Mr. Danielson said. Adding to the challenge, he said, will be the fast-growing Commerce Bancorp Inc. of Cherry Hill, N.J., which has announced plans to expand into the Baltimore-Washington area.

Furthermore, the $1 billion October 2000 purchase of the $7.4 billion asset Keystone Financial Inc. of Harrisburg shows that M&T does not always have the magic touch, Mr. Danielson said.

"The initial results for M&T after buying Keystone have not been strong," he said. The only independent yardstick, deposit market share in Harrisburg, fell from 6. …

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