M&T Bank posts 54% drop in profits due to amount set aside for bad debt

US BANK M&T, in which AIB has a 24 per cent stake, posted a 54 per cent drop in profits in its third quarter, as it increased the amount it is setting aside to cover bad debt.

M&T Bank, whose second-largest shareholder after AIB is Warren Buffett's Berkshire Hathaway, said third-quarter profit fell as it took a charge relating to Fannie Mae and Freddie Mac.

Net income declined to $91.2 million, or 82 cents a share, from $199.2 million, or $1.83, in the same period a year earlier, the New York-based lender said.

M&T joined lenders posting lowered profits as they set aside more to cover bad debts from builders defaulting on commercial mortgages.

The nationalisation of Fannie and Freddie erased the value of their preferred shares.

M&T said last month that it would take a charge its Fannie and Freddie, which had a fair value of $120 million at the end of June.

Chief financial officer Rene Jones said M&T's results were a "steady performance" during a time of economic turmoil.

"We continued to experience growth in our core deposits, which increased for the fourth consecutive quarter. That growth was particularly strong during September, when markets were significantly disrupted," he said.

Interest margins remained stable compared with the first two quarters of 2008.

However, "nonperforming" loans rose during the quarter to $710 million, or 1.46 per cent of total loans.

The allowance for credit losses was $781 million, up from $680 million a year earlier.

Berkshire Hathaway holds a 6.1 per cent stake in the bank.

On a good day for Irish equities, including banking stocks, AIB rose 9 per cent on the Irish Stock Exchange yesterday, adding 31 cent to close at a price of €3.72. - (Additional reporting: Bloomberg)