M&T Bank (MTB) is a regional bank with a heavy concentration throughout the Northeastern US, with more than 650 locations. From 1985 to 2005 the stock went from $2.50 to $100, but has been stagnant since. Until now. This month MTB broke out to a new All-Time High on anticipation of higher interest rates ahead. Higher rates would bring higher profits to a regional bank such as this, the only problem now is the stock’s already surpassed its Fair Value.
Here’s what I wrote about M&T Bank last qtr:
M&T was founded in 1856 and has a heavily concentrated presence of more than 700 branches in the New York/Maryland surrounding area, where it is the number one small business lender…MTB has been profitable in every quarter the past 36 years and Berkshire Hathaway owns around 5% of the company. MTB management puts profits to shareholders first, during the last 30 years a third of profits have gone to dividends, another third to repurchase shares, and the rest for retained capital. To fuel growth, M&T Bank is big into acquisitions, with around 25 in the last 25 years.
Ten Year Chart
As you can see from the ten-year chart MTB is expected to have profits fall 5% this year. Still the stock shot to a new high. Anticipation of higher rates. Still, profit growth was 0% last qtr, year-over-year.
Looking ahead, profit growth the next four qtrs is estimated at : +6%, +11%, +24% and +16% respectively. So behold next qtr growth should be good. The problem I have is the stock’s P/E is now 17, which is a little high.
Profit History
During the past ten years MTB has had a median P/E of 16 or 17 most of the time. Now the P/E is 17 and profits are not really growing now. So I feel the move higher has already been made.
Sharek’s Take
M&T Bank is up in anticipation of higher interest rates and better profits. But at 17x earnings I think the move has already been made. I just don’t envision a 18 or 19 P/E on this stock. It’s fine to accumulate a few shares of MTB here as it has upside through next year, but I wouldn’t make it a heavily weighted position.
View the One Year Chart here. View the Earnings Table here.
