Stock Wars: M&T Bank Vs. Webster Financial
Benzinga’s weekly Stock Wars matches two leaders in a major industry sector to determine which company is the best investment.
This week, the duel opposes two financial institutions: M&T Banking Corporation MTB and Webster Financial Corporation WBS.
The case of M&T: This bank, headquartered in Buffalo, New York, dates back to 1856, when business partners Pascal Pratt and Brownson Rumsey based Manufacturers and Traders Trust Society in a rented storefront, with a focus on commercial loans. Before reaching its first anniversary of activity, the bank outgrew its location and increased its capital by 250%.
In 1902, it merged with Buffalo Merchants Bankthe first in a long series of mergers and acquisitions that continued last month with the completion of a merger with People’s United Financial Inc. of Bridgeport, Connecticut.
Today, M&T Bank has a network of more than 1,000 branches and 2,200 ATMs, with a footprint that spans 12 states, from Maine to Virginia to the District of Columbia. The bank has been listed on the stock exchange since May 1998.
The $8.4 billion People’s United merger has been a major recent corporate focus for M&T, which has also underscored its commitment to corporate social responsibility with efforts such as its Environmental, Social and Governance Report ( ESG) recently released for 2021 titled “Together We Can,” his $300,000 commitment to the operations of the nonprofit Entrepreneurship for All Buffalo Region and his outreach to encourage small businesses — especially women and minority-owned businesses – in Pennsylvania.
In its latest earnings report, first-quarter data released April 20, M&T shared news of net profit of $362 million, up from $447 million a year earlier. Diluted earnings per common share were $2.62, compared to $3.33 for the same period in 2021.
M&T closed the first quarter with total assets of $149.9 billion, down from $150.5 billion a year earlier, and loans and leases (net of unearned discount) at $91.8 billion , up from $99.3 billion in the first quarter of 2021. The day before the first-quarter earnings announcement, the bank declared a quarterly cash dividend of 35 cents per share on the Series H preferred stock.
“First quarter results continue to reflect M&T’s strong credit underwriting, as evidenced by historically low write-offs for the quarter and a stable provision for credit losses,” the chief financial officer said. Darren J. King. “Revenues were in line with expectations and expenses, which include the usual seasonal increase in salaries and benefits expenses, were managed prudently.
“Our capital position remains very strong with an estimated Common Equity Tier 1 capital ratio of 11.6%, compared to 11.4% at the end of last year,” King added. “We were delighted to complete the People’s United merger and look forward to working with our new colleagues to develop our first banking franchise.”
M&T shares opened Wednesday at $165.83, sandwiched between its 52-week range of $128.46 to $186.95.
See also: The Complete Stock Wars Series
Webster’s case: In 1935, 24 years old Harold Webster Smith borrowed money from family and friends to create First Waterbury Federal Savings, a home loan originator serving central Connecticut. Within three years of opening, the bank had accumulated over $1 million in assets. Smith was the bank’s CEO until 1987 and chairman of the board until 1995, when it was renamed Webster Bank in his honor.
Webster expanded its services and reach in a gradual process – converting to stock ownership in 1986, introducing trust and investment services in 1997, completing its first acquisition in 1998 and having an IPO in 2002. More earlier this year, it completed a $10.3 billion acquisition of Sterling National Bank and moved its headquarters to Stamford, Connecticut. Today, it operates 202 financial centers in Connecticut, New York, Rhode Island and Massachusetts.
In addition to the transaction with Sterling, recent developments at Webster include the announcement in February of the acquisition of Bend Financial Inc., a provider of cloud-based platform solutions for health savings accounts. This market is a major focus for Webster. In the years following its acquisition in 2005 of HSA Bankit is the country’s largest bank administrator and trustee of health savings accounts.
In its latest earnings report, first-quarter data released April 28, Webster announced the news of $394.2 million in net interest income, up from $223.8 million a year earlier. Diluted earnings per common share were down 14 cents from $1.17 per diluted share a year earlier.
Webster closed the first quarter with $65 billion in total assets versus $34.9 billion a year earlier, loans and leases (net of unearned discount) at $35.9 billion versus $21.4 billion in the first quarter of 2021. The week after the first-quarter earnings announcement, the bank declared a quarterly cash dividend of 40 cents per share on common stock.
“This was a historic quarter for Webster as we completed our merger on an equal footing with Sterling Bancorp,” said John R. Ciulla, Chairman and CEO. “We are excited about our future as a combined entity as we add scale, talent and capabilities that will enhance our customer experience. I am also proud that we have been able to produce strong business trends under while combining these complementary organizations.”
Shares of Webster opened Wednesday at $49.92, closer to the lower end of its 52-week range of $45.60 to $65.
The verdict: Compared to stocks of memes, crypto, tech companies, and other high-volatility vehicles, banking stocks are both strong and stable — and a bit boring, albeit in a good way. Nor is the banking sector distressed by the deteriorating quality of the US economy – the sector has learned the lessons of the Great Recession the hard way.
M&T and Webster have just completed successful acquisitions that increase their respective footprints, ironically encroaching on each other’s territories, with M&T expanding its presence into Webster’s Connecticut estate while Webster permeates M&T’s bailiwick in New York.
Webster’s shares are trading lower, but that’s not necessarily a cause for concern. And while M&T’s first quarter numbers weren’t as strong as a year earlier’s performance, the bank is still holding its own in a highly competitive industry.
For those who want their investments to take them on a dizzyingly fast journey to the moon, these are probably not the right vehicles. But for those who can do without the drama created by the oscilloscope nature of today’s markets and enjoy a decent dividend each quarter, M&T and Webster are worth considering. For this Stock Wars duel, the verdict is a tie with both stocks getting the thumbs up.
Photo by Joshua Clancy Hall