M&T Bank Corp.

The stable outlook on M&T incorporates our view that loan losses will gradually rise but remain relatively low over the next two years, but we expect certain other asset quality metrics to remain worse than large regional bank peers'. We also expect loan losses will not rise substantially given conservative lending policies and current property valuations. We could lower the ratings if loan performance continues to deteriorate from current levels or does not exhibit the gradual improvement that we eventually expect, or if the completed acquisition of People's creates integration or operational challenges. We would view a substantial rise in net charge-offs to levels that are much worse than peers' unfavorably. Conversely, we could raise the ratings if the company

...We expect M&T Bank Corp.'s asset quality to remain pressured given concentrations while loan losses remain modest. M&T has a large proportion of economically sensitive loans, including large investor-owned real estate and construction loan exposures--which are the highest among similarly rated peers. M&T's nonaccrual loans have continued to rise in recent quarters, hurt by these economically sensitive loan exposures, in contrast to the improvement experienced at many rated U.S. regional banks. In addition, total criticized loans remain elevated and much higher than similarly rated peers, having also increased materially in recent years. We view M&T's good earnings generation and solid market position in the mid-Atlantic region favorably. M&T's earnings generation and consistency are good, in our view, aided by its historically low loan losses and satisfactory proportion of noninterest revenue. We expect the company's net interest margin (NIM) to rebound given the Federal Reserve's recent...

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