M&T Bank Earnings Hit by Mortgage Woes

January 14, 2008 No Comments »

Regional bank M&T Bank Corp. said today that fourth-quarter earnings slid 70 percent thanks in part to the falling value of its CDO holdings and higher provisions for loan losses.

M&T’s fourth-quarter income dropped sharply to $64.9 million, or 60 cents a share, compared to $213.3 million, or $1.88 per share, during the same period last year.

Analysts polled by Thomson Financial had expected fourth-quarter earnings of $1.63 a share on average.

“The past year was marked by unprecedented turbulence in the financial markets and, in particular, in the residential real estate arena,” CFO Rene Jones said in the earnings release.

The company took a $127 million charge in the fourth quarter related to the falling value of its collateralized debt obligation holdings, reducing earnings by 71 cents per share.

On a positive note, the bank said it reduced its exposure to the risky investments to just $4.4 million as of December 31, 2007.

“M&T has quickly taken the necessary actions to appropriately address a few areas of heightened concern,” Jones added.

“We have eliminated all but $4.4 million of our exposure to collateralized debt obligations backed by residential mortgages and have adequately reserved for losses inherent in the Alt-A residential real estate loan portfolio.”

The Buffalo, NY-based bank pumped up its loan loss reserves to cope with rising mortgage defaults, setting aside $101 million during the quarter, up from just $28 million the prior year.

The total provision for credit losses in 2007 totaled $192 million, up from $80 million a year earlier.

Net loan charge-offs for the year totaled $114 million, or .26% of average loans outstanding, including $53 million in the fourth quarter, up from $68 million, or .16% of average loans in 2006.

“While it is likely that weakness in this sector will continue for some time, we believe that our exposure to residential real estate has been appropriately provided for,” Jones added.

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