Fitch Ratings has affirmed
The Rating Outlook remains Negative.
MTB's announced purchase of PBCT would create a bank with
KEY RATING DRIVERS
IDRS AND VIABILITY RATINGS (VR)
The affirmation of MTB's ratings reflects Fitch's view that the risks associated with integration of such a transaction are offset by the strategic and financial benefits, as well as MTB's proven ability to execute on acquisitions. The affirmation also reflects Fitch's expectation MTB will maintain a post-merger CET1 at or above 10%.
The Rating Outlook for MTB's Long-Term IDR remains Negative, indicating Fitch still sees moderate risk of MTB not returning to benchmark financial performance associated with its current 'A' Long-Term IDR. This acquisition will likely extend Fitch's time horizon for resolution of the Outlook.
Fitch believes the acquisition of PBCT will be franchise enhancing, adding market share in existing
In Fitch's view, overall financial and operational success will be dependent on the successful integration of PBCT, and hence Fitch sees moderate execution risks associated with the proposed merger. Helping to mitigate this risk will be MTB experience and credibility in successfully executing on large acquisitions; over the past 35 years MTB has successfully integrated 24 companies, including the 2015 acquisition of
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The subordinated debt for
MTB's preferred stock rating of 'BBB-' is notched four levels below MTB's VR, two times for loss severity and two times for non-performance. MTB's trust preferred securities - Provident (MD) Capital Trust I - are rated at 'BBB-'. The rating is notched two times from the VR for loss severity and two times for non-performance. These ratings are in accordance with Fitch's criteria and assessment of the instruments' non-performance and loss severity risk profiles and have been affirmed due to the affirmation of the VR.
LONG-TERM DEPOSIT RATINGS
The Long-Term uninsured deposit ratings of
HOLDING COMPANY AND SUBSIDIARY
MTB's IDR and VR are equalized with those of its operating companies and bank, reflecting its role as the bank holding company, which is mandated in the
SUPPORT RATING AND SUPPORT RATING FLOOR
MTB has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, MTB is not systemically important and therefore, the probability of support is unlikely. IDRs and VRs do not incorporate any support.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Over the medium term, should economic conditions normalize and MTB's financial performance improves at or above Fitch's expectations, the Rating Outlook could return to Stable. Normalization would include MBT's earnings returning to pre-pandemic levels, as well as asset quality stabilizing in line with, or better than, peers. However, this acquisition will likely extend the time horizon for any such resolution in order to ensure its successful execution. This is predicated on the bank maintaining an overall conservative risk appetite and capital at or above the 10% level, as mentioned.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Fitch is sensitive to the timing of this proposed acquisition. The agency continues to expect a more-challenging operating environment due to the coronavirus pandemic, which will likely translate into higher credit losses across the industry, as well as more depressed earnings performance for most
Fitch is also sensitive to any lapses not discovered through the due diligence process and the potential for complications in cultural integration between the entities. To the extent that Fitch observes large oversights or key management turnover, it could create negative momentum for the rating. Moreover, integration failures (including operational and information technology related) that result in large unexpected costs and cause MTB to not to achieve deal expected synergies could also pressure the rating.
Fitch expects MTB to continue to manage the CET1 ratio at or above the 10% level during integration with share buybacks being put on hold for the remainder of the year. If CET1 were to migrate below this level and remain there absent a credible plan to rebuild, the bank's rating would likely be adversely impacted.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Rating ActionsENTITY/DEBT RATING PRIOR
Manufacturers and Traders Trust Company LT IDR A Affirmed A
ST IDR F1 Affirmed F1
Viability a Affirmed a
Support 5 Affirmed 5
Support Floor NF Affirmed NF
senior unsecured
LT A Affirmed A
subordinated
LT A- Affirmed A-
long-term deposits
LT A+ Affirmed A+
short-term deposits
ST F1 Affirmed F1
Provident (MD) Capital Trust I
preferred
LT BBB- Affirmed BBB-
M&T Bank Corporation LT IDR A Affirmed A
ST IDR F1 Affirmed F1
Viability a Affirmed a
Support 5 Affirmed 5
Support Floor NF Affirmed NF
senior unsecured
LT A Affirmed A
preferred
LT BBB- Affirmed BBB-
Wilmington Trust Company LT IDR A Affirmed A
ST IDR F1 Affirmed F1
Viability a Affirmed a
Support 5 Affirmed 5
Support Floor NF Affirmed NF
Wilmington Trust Corporation LT IDR A Affirmed A
ST IDR F1 Affirmed F1
Viability a Affirmed a
Support 5 Affirmed 5
Support Floor NF Affirmed NF
Wilmington Trust, National Association LT IDR A Affirmed A
ST IDR F1 Affirmed F1
Viability a Affirmed a
Support 5 Affirmed 5
Support Floor NF Affirmed NF
long-term deposits
LT A+ Affirmed A+
short-term deposits
ST F1 Affirmed F1
View additional rating details
Additional information is available on www.fitchratings.com
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