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M&T making combination of cuts, expenditures related to Hudson City deal

Hudson City Bancorp’s 135 branches in New Jersey, Connecticut and downstate New York will convert to M&T Bank Corp.’s identity over President’s Day weekend next month.

Buffalo-based M&T wrapped up its $5.3 billion deal for Hudson City last November and has been working to bring the Hudson City operations into the fold.

M&T expects to incur about $40 million in expenses related to the acquisition, the majority of them coming during the first half of this year, in areas such as converting the branches and moving Hudson City customer data on to M&T’s systems, said Rene Jones, vice chairman and chief financial officer.

Separately, M&T is also trimming expenses following the deal. Some cost cuts have already occurred, but the bank still intends to make $40 million to $50 million worth of expense reductions, Jones said. M&T is cutting 366 jobs at Hudson City. And when the branch conversion is complete, M&T will bring in-house processing work that Hudson City has handled through outside contracts.

At the same time, Jones said, M&T needs to hire some more people, such as business bankers, to bring the New Jersey locations up to M&T’s full complement of services.

Jones discussed the Hudson City progress on Tuesday as part of the release of the bank’s fourth-quarter earnings.

M&T recorded fourth-quarter net income of $271 million, down 2 percent from a year ago. Two of the three months of results reflected the completion of the Hudson City deal. The bank recorded diluted earnings per share of $1.65, down 14 percent from $1.92 a year earlier. The earnings were impacted by acquisition related expenses. M&T made a cash payment of $2.1 billion and issued about 26 million shares of stock.

For M&T, the financial impact of the Hudson City deal on its results will start to be fully felt in the second half of the year, Jones said. “A big part of why we decided to go to New Jersey is to bring our full-service commercial activities there. That will take some time.”

The bank’s retention rate of Hudson City customers “has been right on track,” Jones said. “It’s really in our interest to try to maintain those customers for some period of time, to see if they have interest in us in meeting their needs for other banking products and services.”

For all of 2015, M&T reported net income of $1.08 billion, up from $1.07 billion in 2014. Jones called last year “particularly satisfying” for M&T, noting the regulatory steps the bank completed, its community involvement amid improvement in the upstate economy, and completion of the Hudson City deal.

Jones noted that M&T was already operating several offices in New Jersey, as the bank awaited the green light to acquire the Hudson City branches.

“A lot of us have been waiting on the sidelines to go help about 130 of our employees who had been out there who had been introducing themselves to New Jersey customers,” he said. “Now that we’re able to do that in full force, we think it’s a great accomplishment, too.”

Jones, during a Thursday conference call with analysts, reacted to a federal indictment of Wilmington Trust, over alleged concealment of troubled loans. M&T owns Wilmington Trust, but the case predates the 2011 acquisition.

“We strongly believe that this unprecedented action is unjustified, and Wilmington Trust intends to vigorously defend itself,” Jones said.