Vehicles drive past an M&T Bank branch in New York
Daniel Tepper/Bloomberg
Another bank merger is in the works and Wall Street is loving it.
M&T Bank (ticker: MTB) announced Monday that it plans to buy People’s United Financial (PBCT) in an all-stock transaction that values the Bridgeport, Conn.-based bank at roughly $7.6 billion. M&T Bank gained 2.4% on the news while People’s United shares popped 14.6%.
Investor enthusiasm comes amid heightened expectations for bank merger activity this year. Last year was expected to be a big one for mergers before the coronavirus interrupted activity as banks had to focus on securing their own business rather than thinking about acquiring others. But while the pandemic paused activity, it only increased the rationale for regional tie-ups as banks found that they need to boost their scale and digital offerings amid a period when interest rates are expected to stay low for some time, squeezing potential profits.
Late last year, Huntington Bancshares (HBAN) and TCF Financial (TCF) announced that they will combine in an all-stock merger. That deal followed First Citizens Bancshares (FCNCA) announcing plans to buy CIT Group (CIT).
As for the merits of the M&T-People’s United tie-up, Wall Street was especially enthusiastic.
“M&T Bank has a history of successful bank mergers and is a proven integrator. M&T Bank had spent the prior few years investing meaningfully in its franchise, which we believe has also put it in a better place to consummate a deal today,” Ken Usdin, analyst at Jefferies, wrote in note Monday. People’s United is also an attractive target with an efficiency ratio of 54%, below the peer average of 59%, Usdin noted.
The combined banks will have $200 billion in assets and 1,100 locations spread across 12 states in the Northeast and mid-Atlantic.
“In People’s United, we have found a partner with an equally long history of serving and supporting customers, businesses and communities,” said René Jones, chairman and chief executive officer of M&T Bank, said in a statement Monday.
M&T Bank said that it expects the merger will boost earnings by up to 12% by 2023, thanks in part to $330 million in annual cost synergies. The merger is expected to close by year-end, subject to regulatory and shareholder approval.
Merger news was also good for bank stocks in Monday’s trading. The SPDR S&P Regional Banking exchange-traded fund (KRE) advanced 2.3% while the S&P 500 slid 0.6%.
Write to Carleton English at [email protected]
