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M&T targets trust business; Bank integrating Wilmington parts, readies for future

M&T Bank Corp. completed its conversion of the newly acquired Wilmington Trust Corp.'s branches and commercial banking operation two weeks ago, and is now turning more attention to converting the highly valuable trust business, to make sure it does it right.

That's what Chief Financial Officer Rene Jones told an investor conference earlier this month, as he sought to emphasize M&T's historic steady performance while reassuring attendees about future expectations for the bank.

Already, Jones said, now that its purchase of Wilmington Trust is complete, bank executives "keep getting asked" if they'll be able to lower Wilmington's expenses by more than the 15 percent that was originally projected -- or about $80 million a year.

The $400 million purchase closed in mid-May, so M&T only had six weeks of operating Wilmington Trust during the second quarter, and only switched over computer and other systems recently. So the bank hasn't achieved much of the projected savings yet, although Jones said that should start now. But the full amount won't be realized until the end of 2012.

Instead, he said, the bank is more focused on "blending environments and capitalizing on trust opportunities," noting that the trust conversion is slated for the middle of next year.

M&T is already one of the nation's largest commercial banks, with extensive operations in Maryland and Pennsylvania near Delaware, so it's familiar with the territory and business.

But it didn't have a significant wealth management business before, nor did it offer the sophisticated corporate financial services that Wilmington Trust was known for. And that's where M&T executives have touted the biggest potential for the Buffalo bank.

"If we're going to spend our time, we should spend it on making sure we get the integration right, because it's a new business for M&T and that's going to generate more for M&T on the revenue side than any cost savings," Jones said.

On the other side, Jones said the bank will incur $100 million in one-time merger costs from the deal, with $41 million in charges already recorded in the second quarter. Total merger-related charges are expected to tally $159 million.

Meanwhile, Jones said the bank still has an appetite for more deals. "We're always ready to do a transaction and we have the ability to do them, if the right thing comes up," he said. "You know how we work. It tends to be things that are around our footprint or where partnerships can be formed."

Citing the regulatory and economic pressure on all banks today, as well as increased operating costs that hamper returns, he added, "With the amount of uncertainty that's out there today and the fact that banks are trading low, it's a decent environment."

Responding to an investor question, Jones also said HSBC Bank USA's decision to sell its entire upstate New York branch business to First Niagara Financial Group is a "slight positive" for M&T, not a negative. He noted that M&T is used to competing against "very large banks" and "we've done well" against them, so First Niagara's new size isn't a concern.

"One of the things we've got going for us is we're a name that's been there for some time," he said. "All that's happened is a competitor left. So that bodes very well for us."

Finally, Jones said M&T expects to finish repaying the remainder of the federal government's investment in the bank under the Troubled Assets Relief Program. M&T repaid $700 million in May -- including Wilmington Trust's $330 million and $151.5 million from its purchase of Provident Bankshares Corp. in Baltimore -- but still has $381.5 million left.

The company has been taking a slower approach to repaying the money so that it could raise enough capital on its own without having to issue more stock and dilute current shareholders.

"We laid out a plan that we thought made sense," he said. "As long as the plan gets executed and there aren't any shocks to the economy, we should be fine, and we should be out of TARP in short order."


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