The U.S. economy shows signs of recovery, but not everyone is reaping the benefits, said M&T Bank Corp.’s chairman and CEO Robert G. Wilmers, in his annual letter to shareholders.
In his message, Wilmers reiterated his support for M&T’s planned acquisition of Hudson City Bancorp, even as another deadline looms.
Wilmers noted key statistics point to economic progress: consistent growth in U.S. real gross domestic product, private sector job increases, and a reduced household debt service burden.
“Despite these ostensibly positive trends, for far too many Americans the recovery is something about which they read – a phenomenon affecting other people in other places,” he said. “While metropolitan areas are doing much better, rural areas continued to struggle.”
And Wilmers expressed concern about the “current, uneven recovery on the economy’s future.” He mentioned aggregate student loan debt of more than $1.1 trillion, one consequence of which, he said, is deferment of home ownership. Home ownership among 18- to 34-year olds has fallen to 13 percent, compared to more than 17 percent before the financial crisis, he said.
Wilmers also expressed concern about a low rate of business ownership by millennials – despite “their portrayals in popular media as a group of swashbuckling entrepreneurs” – and how the average net worth of those under 30 years old has fallen by nearly half since 2007.
“These are not the signs of the kind of America for which we strive and aspire – one in which opportunity, prosperity and growth are broadly shared,” he said.
With those trends as a backdrop, Wilmers said, “one must weigh the unintended consequences of regulation, which burden the institutions that power the core of our local economies in America.”
“The time has come to allow America’s community banks to serve their traditional roles of taking deposits and making prudent loans to the friends and neighbors they know, and not allow misplaced animus and a one-size-fits-all approach to regulation to hinder the American economic recovery finally under way.”
Regulations are necessary for “improving transparency and reducing opacity in the financial services industry,” he said. “However, there is a need for balance, where supervision is commensurate with the complexity of an institution’s business model.”
The M&T executive suggested adopting a “tiered approach” to regulation based on a bank’s complexity as opposed to just its size, while preserving the “core intent” of Dodd-Frank regulations. Wilmers in the past has drawn a distinction between “Main Street” banks such as M&T and “Wall Street” banks, which he said have far more complex business models.
Even for nonshareolders, Wilmers’ letter each year draws attention due to his status as a widely respected banker. For Western New Yorkers, Wilmers is also the voice of a major Buffalo-based corporation, with 6,300 of its employees based in this region, among nearly 15,800 companywide.
Wilmers weighed in on M&T’s planned deal for New Jersey-based Hudson City. The deal was valued at $3.7 billion when it was announced in August 2012; M&T in a regulatory filing said the value of the deal climbed to $5.4 billion as of the end of last year, due the increase in M&T’s share price since the announcement.
The deal has stalled as M&T has worked to improve its anti-money laundering and Bank Secrecy Act systems, at the direction of federal regulators. M&T and Hudson City on three occasions have extended a deadline after which either party could walk away from the deal without a financial penalty; the current deadline is April 30. Federal regulators have not said when approval might come.
Wilmers said the bank is “dedicated to crossing the finish line – even if it’s a bit farther out than we thought.” The delays are “admittedly frustrating,” but “this is a merger to which both parties remain deeply committed,” he said.
Even with the Hudson City deal in limbo, M&T has made inroads in New Jersey. The bank opened three new offices there in 2014, in addition to four offices already in place, and has a loan portfolio of $1.3 billion in the state. “We are in New Jersey to stay,” Wilmers said.
Meanwhile, M&T spent $266 million last year on a “broad swath” of efforts to help the bank meet its regulatory obligations, “an unprecedented amount in unprecedented times,” he said. That total included $155 million spent to enhance M&T’s anti-money laundering/Bank Secrecy Act program, on top of $60 million spent in that category in 2013.
The bank last year fully implemented a “know your customer” system to better assess potential risks associated with each of M&T’s 3.6 million customers and their 5.4 million accounts, he said.
The release of Wilmers’ annual letter came a few weeks before the bank’s annual meeting of shareholders, which is set for April 21 in Buffalo. Wilmers disclosed that Jorge G. Pereira will retire after that meeting as vice chairman of the boards of directors of M&T Bank Corp. and M&T Bank. As M&T’s largest individual, nonmanagement shareholder, Pereira “added an independent voice to the board’s consideration of executive compensation and corporate governance matters, while serving as the lead independent director,” Wilmers said. He praised Pereira for his “judgment and wisdom.”
Wilmers and Pereira in 1982 joined the boards of what were then known as First Empire State Corp. and M&T Bank.