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Stock Strategist

M&T Is One of the Best Underwriters We Cover

The undervalued bank has good management and a stable franchise.


M&T Bank (MTB) is a midsize bank under exemplary management that has consistently prioritized shareholder returns through a combination of excellent underwriting, efficient operations, and savvy acquisitions. M&T has historically been a quality company, with one of the best underwriting histories of the banks we cover; even Warren Buffett’s Berkshire Hathaway has taken a stake in it.

M&T derives about two thirds of its income from net interest income, and with the bank’s cheaper deposit base, it is more sensitive to movements in interest rates. Much of the company’s loan book is composed of commercial loans, which tend to be the fastest to reprice in a falling interest-rate environment. Investors should be aware of this as we are entering into a very uncertain time with regard to the future rate environment. The remaining one third of revenue comes from nonbanking businesses like wealth management or deposit service fees, which tend to scale well and are less tethered to interest rates. We think that M&T has a comfortable barrier to entry in these operations due to its scale as well as its strong relationships with depositors and customers. The bank has an especially strong position in its commercial real estate operations in the U.S. Northeast. Its mortgage banking operation does have an element of cyclicality to it, again, partially tied to rates. Either way, we don’t see the bank’s competitive positioning in these markets changing, even if the macro backdrop does.

Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.