Profits at M&T exceed forecasts

Profits at M&T Bank, the US group that acquired AIB's Allfirst operation following the Rusnak scandal, beat expectations in the third quarter.

The New York-based bank, in which AIB holds a 22.5 per cent stake, reported profit after tax of $186.4 million (€1,51.3 million), 19 per cent ahead of the $156.5 million reported in the same period last year.

Earnings per share of $1.56 were 22 per cent of the $1.28 in the year-ago period and ahead of the $1.51 forecast from analysts.

The bank's results were boosted by lower bad debt provisions. In the three-month period, the bank set aside $17 million to cover non-performing loans, half the $34 million provision of the third quarter of 2003.

Non-performing loans amounted to just $181 million, or 0.48 per cent of the loan book at September 30th, down from 0.77 per cent at the same point last year.

An internal reorganisation that lowered its tax liability and the contribution of a tax-deductible $25 million to the M&T Charitable Foundation helped M&T's figures.

The bank also booked a $3 million gain after tax on the sale of a venture capital investment acquired as part of the $3 billion takeover of Allfirst.

The bank also no longer has to contend with expenses related to the merger of the Allfirst operations, a move that made M&T one of the 20 largest banks in the US. These expenses amounted to 10 cents a share in the third quarter last year and 33 cents a share in the first nine months of the year.

M&T said that Allfirst was now fully integrated into the group. It said the acquisition was likely to be more earnings "accretive" than initially projected with better quality assets but a smaller loan book than anticipated.

Net interest income rose just over 2 per cent to $444 million in the quarter but this was due to a 7 per cent rise in lending to $45.9 billion which offset a decline in margins.

Non-interest income rose 6 per cent to $245 million on the year-ago period.

Chief financial officer Mr Michael Pinto said M&T's performance in the third quarter was strong and "generally in line with our expectations". He said full-year earnings would be in line with previous guidance of between $5.90 and $6.10 a share.

On future acquisitions, Mr Pinto said the bank was not actively seeking deals but would consider "compelling" propositions. Davy Stockbrokers said the timing and size of any future deals would be critical for AIB.

"If the bank decides to do a very large transaction, AIB cannot prevent this happening," Davy said. "Moreover, if it requires AIB to issue paper to part-finance the deal (and hence maintain its shareholding), it could ultimately force the disposal of the bank's 22.5 per cent stake."