Fitch Affirms M&T Bank Corp's L-T IDR at 'A-' Following Large Regional Bank Review; Outlook Positive

NEW YORK--()--Fitch Ratings has affirmed M&T Bank Corporation's (MTB) ratings at 'A-/F1'. The Rating Outlook remains Positive. The affirmation and Outlook reflects the company's consistent and solid performance during a difficult operating environment. Additionally, Fitch views the company's strong franchise, veteran management team, and good revenue diversification as rating strengths.

The rating action follows a periodic review of the large regional banking group, which includes BB&T Corporation (BBT), Capital One Financial Corporation (COF), Comerica Incorporated (CMA), Fifth Third Bancorp (FITB), Huntington Bancshares Inc. (HBAN), Keycorp (KEY), M&T Bank Corporation (MTB), MUFG Americas Holdings Corporation (MUFG), PNC Financial Services Group, Inc. (PNC), Regions Financial Corporation (RF), SunTrust Banks Inc. (STI), US Bancorp (USB), Wells Fargo & Company (WFC), and Zions Bancorporation (ZION).

Company-specific rating rationales for the other banks are published separately, and for further discussion of the large regional bank sector in general, refer to the special report titled 'Large Regional Bank Periodic Review,' to be published shortly.

KEY RATING DRIVERS - IDRS, VRs AND SENIOR DEBT

MTB's rating affirmation and Positive Outlook mainly reflects the consistency of the company's performance during a difficult operating environment versus peers. Additionally, Fitch views the company's solid franchise, credit performance, veteran management team, and good revenue diversification as rating strengths.

Offsetting these positives, MTB capital levels tends to be lower than peers. However, Fitch's believes the company's strong equity generation, good asset quality performance through various credit cycles, solid reserves when compared to net charge-offs (NCOs) and moderate dividend payout help offset the below-average capital position. Further, MTB has continued to build its capital position from historical levels.

MTB's earnings profile is considered to be one of the strongest of its peer group as results have not been supported by any reserve release as the company's provision expense continues to exceed NCOs. Further, MTB is one of the most consistent performers as its earnings measures have seen less volatility than most of its large regional peers.

Credit performance has also been solid, despite the company's large exposure to commercial real-estate assets (40% of total loans versus large regional peer average of 21%). MTB's NCO's and NPAs have outperformed most peers in numerous economic downturns evidence of the strong credit culture of the company. Additionally, Fitch believes the company's reserve coverage also provides good support given loss history.

Further, Fitch considers MTB's management team to be a rating strength given the stable, average tenure of 20 plus years with the company. Further, despite a history of acquisitions, board composition has not changed dramatically. Fitch also notes that the MTB's ownership includes roughly 17% held by management and employees of the company which creates a strong alignment between management and shareholders interest.

Although capital position is considered to be MTB's weak spot, Fitch acknowledges the company's improved capital ratios from historical levels such as TCE, leverage and Common Tier 1. The company has continued to build its capital position. As of 2Q'14, TCE and Tier 1 Common estimated (under Basel III) stood at 8.45% (up 84bps compared to 2Q13) and approximately 9.24% (up 114bps from 2Q13), respectively. Further, Fitch believes the company's strong and consistent earnings and credit profile through various credit cycles affords the leaner capital position.

RATING SENSITIVITIES - IDRS, VRs AND SENIOR DEBT

Fitch expects to resolve the Outlook following the removal of the BSA/AML-related MOU or final approval to acquire Hudson City, which would indicate sufficient improvement in its BSA/AML risk management program. If the regulatory order or the acquisition is still not completed within the next 12 months, Fitch may consider revising the Outlook to Stable.

Positive rating momentum also hinges on MTB successful remediation of its current BSA/AML deficiencies without any material regulatory fines and/or restrictions. Additionally, Fitch would expect MTB's capital position to continue to build while maintaining strong earnings, solid reserves and good credit performance.

Conversely, negative rating drivers would be a more aggressive approach to capital management, and/or announcing an acquisition in the near term given the sizeable Hudson City transaction. In addition, unexpected changes to current business strategy or key executive management would also be viewed negatively.

KEY RATING DRIVERS - HOLDING COMPANY

MTB's IDR and VR are equalized with those of its operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary default probabilities.

RATING SENSITIVITIES - HOLDING COMPANY

Should MTB's holding company begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies. This is viewed as unlikely though for MTB, given the strength of the holding company liquidity profile.

Fitch is now considering introducing a rating differential between the holding company and bank in the U.S. due to structural changes in the sector and the evolving regulatory landscape, as described in the special report 'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles', dated March 27, 2014. Given Fitch's views that MTB may not receive a long-term debt requirement, its ratings may not be impacted as a result of Fitch's evolving review regarding notching.

KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR

MTB has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, MTB is not systemically important and therefore, the probability of support is unlikely. IDRs and VRs do not incorporate any support.

RATING SENSITVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

MTB's Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need.

KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by MTB and by various issuing vehicles are all notched down from MTB or its bank subsidiaries' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles.

RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The ratings of subordinated debt and other hybrid capital issued by MTB and its subsidiaries are primarily sensitive to any change in MTB's VR.

KEY RATING DRIVERS - SUBSIDIARY AND AFFILIATED COMPANY

The IDRs and VRs of MTB's bank subsidiaries benefit from the cross-guarantee mechanism in the U.S. under FIRREA, and therefore the IDRs and VRs of Manufacturers and Traders Trust Co and Wilmington Trust, N.A. (formerly M&T Bank, NA) are equalized across the group.

The IDRs and VRs of MTB's other major rated operating subsidiaries are equalized with MTB's IDR reflecting Fitch's view that these entities are core to MTB's business strategy and financial profile. These entities include: Wilmington Trust Corporation and Wilmington Trust Company whose IDRs would be sensitive to the same factors that might drive a change in MTB's IDR.

RATING SENSITIVITIES - SUBSIDIARY AND AFFILIATED COMPANY

As the IDRs and VRs of the subsidiaries are equalized with those of MTB to reflect support from their ultimate parent, they are sensitive to changes in the parent's propensity to provide support, which Fitch currently does not expect, or from changes in MTB's IDRs.

To the extent that one of MTB's subsidiary or affiliated companies is not considered to be a core business, Fitch could also notch the subsidiary's rating from MTB's IDR.

KEY RATING DRIVERS - LONG- AND SHORT-TERM DEPOSIT RATINGS

MTB's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

KEY RATING SENSITIVITIES - LONG- AND SHORT-TERM DEPOSIT RATINGS

The ratings of long- and short-term deposits issued by MTB and its subsidiaries are primarily sensitive to any change in MTB's long- and short-term IDRs.

Fitch has affirmed the following ratings with a Positive Outlook:

M&T Bank Corporation

--Long-term IDR at 'A-'; Outlook Positive;

--Short-term IDR at 'F1';

--Viability at 'a-';

--Preferred stock at 'BB';

--Support at '5'

--Support floor 'NF'.

Manufacturers and Traders Trust Co

--Long-term IDR at 'A-'; Outlook Positive;

--Short-term IDR at 'F1';

--Viability at 'a-';

--Senior unsecured debt at 'A-';

--Subordinated debt at 'BBB+'

--Long-term deposits at 'A';

--Short-term deposits at 'F1';

--Support at '5';

--Support floor 'NF'.

Wilmington Trust, N.A. (formerly M&T Bank, NA)

--Long-term IDR at 'A-'; Outlook Positive;

--Short-term IDR at 'F1';

--Viability at 'a-';

--Long-term deposits at 'A';

--Short-term deposits at 'F1';

--Support at '5';

--Support floor 'NF'.

Wilmington Trust Corporation

--Long-term IDR at 'A-'; Outlook Positive;

--Subordinated debt at 'BBB+';

--Short-term IDR at 'F1';

--Viability at 'a-';

--Support at '5';

--Support floor at `NF'.

Wilmington Trust Company

--Long-term IDR at 'A-'; Outlook Positive

--Short-term IDR at 'F1';

--Viability at 'a-';

--Support at '5';

--Support floor at 'NF'.

M&T Capital Trust I - III

--Preferred stock at 'BB+'.

Provident Bankshares Corp.

--Preferred stock at 'BB'.

Provident Bank of Maryland

--Subordinated debt at 'BBB+'.

Provident (MD) Capital Trust I

--Preferred stock at 'BB+'.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' (Jan. 31, 2014);

--'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles' (March 27, 2014);

--'U.S. Banking Quarterly Comment: 2Q14' (July 23, 2014);

--'Index Trend Analysis - 2Q14 (Fitch Fundamentals Index Falls to Neutral)' (July 15, 2014);

--'Risk Radar Global 1Q14' (April 1, 2014).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Rating Banks in a Changing World (Credit Ratings Reflect Evolving Risk Profiles)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=653478

U.S. Banking Quarterly Comment: 2Q14 (Environment Constraining Earnings)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753107

Index Trend Analysis -- 2Q14 (Fitch Fundamentals Index Falls To Neutral)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752428

Risk Radar Global 1Q14

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=742560

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=891976

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Contacts

Fitch Ratings
Primary Analyst
Doriana Gamboa
Director
+1-212-908-0865
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Julie Solar
Senior Director
+1-312-368-5472
or
Committee Chairperson
Joo-Yung Lee
Managing Director
+1-212-908-0560
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Doriana Gamboa
Director
+1-212-908-0865
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Julie Solar
Senior Director
+1-312-368-5472
or
Committee Chairperson
Joo-Yung Lee
Managing Director
+1-212-908-0560
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com