M&T’s profits drop 17 percent amid compliance spending - The Buffalo News
print logo

M&T’s profits drop 17 percent amid compliance spending

M&T Bank Corp.’s fourth-quarter net income fell 17 percent from a year ago, as the bank’s ongoing spending on compliance issues weighed down the results.

Buffalo-based M&T reported fourth- quarter net income of $246 million, compared with $296 million a year ago. Its diluted earnings per share of $1.74 missed analysts’ consensus estimate of $1.92 per share.

The bank’s non-interest operating expenses were $693 million, up 13 percent from a year earlier. That category included spending on professional services connected to upgrading M&T’s Anti-Money Laundering/Bank Secrecy Act program to meet the requirements of the Federal Reserve Bank of New York. M&T needs to resolve those issues before a delayed merger with New Jersey-based Hudson City Bancorp can get approval.

The bank’s professional services expenses were $50 million higher than a year earlier, said Rene F. Jones, M&T’s chief financial officer. He expects the bank’s spending on professional services to “remain elevated through much of 2014,” although at a lower rate than in the fourth quarter.

Analysts have been pressing the bank about its spending on professional services and when that might tail off. A research note from Joseph Fenech and Anna Barnard at Sandler O’Neill & Partners called the quarter “disappointing.”

Jones described spending on compliance requirements and technology upgrades such as a new Web banking platform and a data center in Amherst as investments in the future.

“The environment’s changed in banking, and we just think this is the opportune time to beef up our investments and so forth in our infrastructure,” Jones said. “Some of it’s compliance, and some of it’s not.”

While its spending on professional services will gradually diminish, the bank has also been hiring more staff to deal with issues like compliance on a permanent basis.

“As we mature through this process, the majority of the functions will be in-house,” Jones said. “That means we will have a higher employee base. As a result, we’ll no longer need much of the professional services that we have today, once that infrastructure’s in place.”

And when that is established, he said, the bank will have the employee base and infrastructure it needs to handle the future growth of the bank.

Of the bank’s 565 job openings in Western New York, 25 of them are compliance-related positions, said Michael Zabel, a spokesman.

M&T’s net interest income was $666 million, essentially unchanged from a year ago. Its non-interest income was $446 million, down 1.5 percent from a year ago. That drop was partly due to a 29 percent decline in mortgage banking revenues, as activity cooled off from the height of the refinancing boom.

But those revenues increased 27 percent from the third quarter, as M&T benefited from the mortgage servicing portfolio it picked up from Bank of America last year.

For all of 2013, M&T’s net income was $1.16 billion, up 13 percent from $1.03 billion in 2012.

“The bank is stronger, we’re making investments for the future, and we’re still providing great returns for our shareholders,” Jones said.

And Jones reiterated M&T is committed to completing its deal for Hudson City.

M&T’s stock closed at $111.99 per share on Friday on the New York Stock Exchange, down $2.68.

email: mglynn@buffnews.com

There are no comments - be the first to comment