M&T Bank Corp. expects to spend more than $150 million this year strengthening its anti-money laundering and Bank Secrecy Act program, underscoring the high cost of regulatory compliance.
M&T discussed its spending as it disclosed its second-quarter earnings Thursday. Its net income fell 18 percent, to $284 million, from $348.5 million a year ago. The bank’s diluted earnings per share were $1.98, down 22 percent from $2.55 a year ago. Even so, its earnings per share still exceeded analysts’ expectations of $1.90.
M&T’s push to meet regulatory requirements weighed down the results. The bank recorded non-interest expenses of $681 million, which was up from $599 million a year ago.
M&T’s projected $150 million in spending on its anti-money laundering program in 2014 “gives you some sense of how much effort we’re putting into the process,” said Rene F. Jones, M&T’s vice chairman and chief financial officer. And that is on top of the $60 million the bank said it had spent on improving those programs through the end of 2013.
The Buffalo-based bank seeks to satisfy Federal Reserve concerns about its program to win approval of its $3.7 billion deal for New Jersey-based Hudson City Bancorp.
Jones, in a conference call, said M&T remains committed to the Hudson City acquisition. He faced persistent questions from analysts about whether that deal – announced nearly two years ago – would be completed by Dec. 31, or if another extension might be necessary.
Jones was also asked about when M&T’s high level of spending would start to decline. “I don’t expect to see any significant improvement in the level of expenses we’re running at in the next quarter or so,” he said. “We may begin to see some as we get into the fourth quarter.”
M&T expects to see a “natural progression” of lower expenses throughout 2015, as the bank spends less on external professional services, he said.
Jones said 571 bank employees were devoting most of their time on compliance work – up from 425 in the first quarter – and that figure excludes part-time workers and contractors assigned to the effort.
M&T and Hudson City have set Dec. 31 as a deadline after which either party could walk away without financial penalty, if a deal is not complete. Hudson City will release its second-quarter earnings July 31.