Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector with the goal of determining which company is the better investment.
This week, the duel is between two financial institutions: M&T Bank Corporation (NYSE:MTB) and Webster Financial Corporation (NYSE:WBS).
The Case For M&T: This Buffalo, New York-headquartered bank traces its roots to 1856 when business partners Pascal Pratt and Brownson Rumsey founded Manufacturers and Traders Trust Company in a rented storefront, with a focus on commercial lending. Before reaching its first anniversary in business, the bank outgrew its location and increased its capital by 250%.
In 1902, it merged with Merchants Bank of Buffalo, the first in a long series of combinations and acquisitions that continued through last month with the completion of a merger with People’s United Financial Inc. of Bridgeport, Connecticut.
Today, M&T Bank has a network of more than 1,000 branches and 2,200 ATMs, with a footprint that spans 12 states from Maine to Virginia plus the District of Columbia. The bank has been publicly traded since May 1998.
The $8.4 billion People’s United merger has been the major recent corporate focus of M&T, which has also been stressing its commitment to corporate social responsibility with such endeavors as its recently published Environmental, Social and Governance (ESG) Report for 2021 titled “Together We Can,” its $300,000 commitment to the Buffalo-area operations of the nonprofit Entrepreneurship for All and its outreach to encourage small businesses — particularly women- and minority-owned enterprises — in Pennsylvania.
In its most recent earnings report, the first-quarter data published April 20, M&T shared the news of $362 million in net income, down from $447 million one year earlier. Diluted earnings per common share were $2.62, compared to $3.33 in the same period during 2021.
M&T closed the first quarter with $149.9 billion in total assets, versus $150.5 billion the year before, and loans and leases (net of unearned discount) at $91.8 billion, compared with $99.3 billion in the first quarter of 2021. The day before announcing the first-quarter earnings, the bank declared a quarterly cash dividend of 35 cents per share on Series H Preferred Stock.
“The first-quarter results continue to reflect M&T's strong credit underwriting as evidenced by historically low charge-offs for the quarter and a stable allowance for credit losses,” said Chief Financial Officer Darren J. King. “Revenues were in line with expectations and expenses, which include the usual seasonal increase in salaries and employee benefits expense, were prudently managed.
“Our capital position remains very strong with an estimated Common Equity Tier 1 ratio of 11.6%, compared with 11.4% at last year's end,” King added. “We were excited to close the People's United merger and look forward to working together with our new colleagues to expand our premier banking franchise.”
M&T shares opened for trading on Wednesday at $165.83, sandwiched between its 52-week range of $128.46 to $186.95.
See Also: The complete Stock Wars series
The Case For Webster: In 1935, 24-year-old Harold Webster Smith borrowed money from his family and friends to create First Federal Savings of Waterbury, a home loan originator serving central Connecticut. Within three years of opening, the bank accumulated more than $1 million in assets. Smith served as the bank’s CEO until 1987 and as chairman of the board until 1995, when it was renamed Webster Bank in his honor.
Webster expanded its services and scope in a gradual process — converting to stock ownership in 1986, introducing trust and investment services in 1997, making its first acquisition in 1998 and having an IPO in 2002. Earlier this year, it completed a $10.3 billion acquisition of Sterling National Bank and relocated its headquarters to Stamford, Connecticut. Today, it operates 202 financial centers across Connecticut, New York, Rhode Island and Massachusetts.
In addition to the Sterling transaction, Webster’s recent corporate developments include February’s announcement of the acquisition of Bend Financial Inc., a cloud-based platform solution provider for health savings accounts. That market is a major focus for Webster. In the years since its 2005 acquisition of HSA Bank, it is the nation’s largest bank administrator and trustee of health savings accounts.
In its most recent earnings report, the first-quarter data published on April 28, Webster announced the news of $394.2 million in net interest income, compared to $223.8 million one year earlier. Diluted earnings per common share registered a 14-cent loss versus $1.17 per diluted share in the previous year.
Webster closed the first quarter with $65 billion in total assets compared to $34.9 billion the year before, loans and leases (net of unearned discount) at $35.9 billion compared with $21.4 billion in the first-quarter of 2021. The week after announcing the first-quarter earnings, the bank declared a quarterly cash dividend of 40 cents per share on common stock.
"This was a landmark quarter for Webster, as we closed our merger of equals with Sterling Bancorp," said John R. Ciulla, president and CEO. "We are excited about our future as a combined entity, as we are adding scale, talent, and capabilities that will enhance our client experience. I am equally proud we were able to produce strong underlying business trends while at the same time combining these complementary organizations."
Webster shares opened for trading on Wednesday at $49.92, closer to the lower end of its 52-week range of $45.60 to $65.
The Verdict: Compared to meme stocks, crypto, tech companies and other high-volatility vehicles, bank stocks are both solid and stolid — and a bit boring, albeit in a good way. Banking is also not being upended by the fraying quality of the U.S. economy — the industry learned its lessons from the Great Recession the hard way.
Both M&T and Webster are coming off successful acquisitions that are growing their respective footprints, ironically encroaching on each other’s territories with M&T expanding its presence into Webster’s Connecticut domain while Webster permeates M&T’s New York bailiwick.
Webster’s shares are trading on the low side, but that’s not necessarily a cause for alarm. And if M&T’s first-quarter numbers were not as muscular as the performance from one year earlier, the bank is still holding its own in a highly competitive sector.
For those who want their investments to take them on a fast and giddy trip to the moon, these are probably the wrong vehicles. But for those who can do without the drama created by the oscilloscope nature of the current markets and enjoy getting a decent dividend either quarter, M&T and Webster are worth considering. For this Stock Wars duel, the verdict is a tie with both stocks getting thumbs up.
Photo by Joshua Clancy Hall
