Fitch Ratings has affirmed M&T Bank Corporation's (MTB) Long-Term Issuer Default Rating (IDR) at 'A' following its announced purchase of People's United Financial Inc (PBCT).

The Rating Outlook remains Negative.

MTB's announced purchase of PBCT would create a bank with ~$200 billion in assets and a network of more than 1,100 branches/2,000 ATMs that will cover 12 states from Maine to Virginia and the District of Columbia. The $7.6 billion all-stock transaction (1.64x of tangible book value) is expected to close sometime in 4Q21, contingent on shareholder and regulatory approvals.

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 New York markets, while garnering immediate presence to attractive New England markets. Moreover, the deal is expected to result in fully phased-in annual costs savings of ~$330 million; one-time merger charges are expected to be ~$740 million at closing. Fitch notes MTB's loan composition is not expected to materially change post acquisition, and PBCT's credit costs have actually been lower than even MTB's since 2007, which is reassuring.

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 Hudson City Bancorp.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The subordinated debt for Manufacturers and Traders Trust Company is notched one level below MTB's VR for loss severity. In accordance with Fitch's Bank Rating Criteria, this reflects alternative notching to the base case of two notches due to Fitch's view of U.S. regulators' resolution alternatives for an entity like MTB as well as early intervention options available to banking regulators under U.S. law.

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 Manufacturers and Traders Trust Co, are rated 'A+', one notch higher than MTB's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

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 U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary failure and default probabilities.

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 U.S. banks. Should Fitch observe that the ACL associated with PBCT's legacy loan book is not sufficient such that credit costs adversely affect MTB's earnings and/or capital, the bank's rating is likely to be pressured.

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 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579]

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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