M&T's profits fall 5% on credit crisis

The meltdown in the US subprime market has affected profitability at M&T, the US bank in which AIB has a 24 per cent stake.

M&T, which is one of the first large US retail banks to report quarterly results, said its third-quarter profit fell by 5 per cent as revenue declined, while losses from mortgages and other loans surged.

The bank's results can be seen as a predictor of the results of other large US banks, many of which are scheduled to report next week.

The results fell short of analysts' expectations as M&T doubled the amount it set aside for credit losses to $34 million (€23.9 million), while non-performing loans more than doubled to $371.4 million, which has been blamed on residential homebuilders and developers.

Credit conditions were causing "high net charge-offs, delinquencies and non-performing loans at M&T and throughout the banking industry", the bank said.

M&T reported a $26 million increase in non-performing residential property loans. It said that many came from defaulters in "Alt-A" mortgages, which are often sold to people who cannot show income or assets.

Net income at M&T fell by 5 per cent to $199.2 million from $210.4 million a year earlier.

Operating profits, excluding an investment loss, dropped by 6 per cent to $208.7 million, or $1.92 per share, from $223.2 million, or $1.96 per share, for the corresponding period in 2006. Analysts had on average forecast a profit of €1.94 per share.

Lending income rose 2 per cent to $467.7 million from $457.2 million, while fee income fell 8 per cent to $252.9 million from $273.9 million.

The US bank, which is based in Buffalo, New York, has $60 billion in assets and more than 650 branches in seven US states and in Washington DC.

M&T's shareholders include Berkshire Hathaway, the investment company owned by Warren Buffett, which has about 6.3 per cent of the bank.

Only AIB and M&T's chief executive, Robert Wilmers, hold larger stakes.

However, the effect of the M&T results for AIB was "minimal", Davy stockbrokers said in a note released yesterday evening. The US bank contributes just 8 per cent of AIB's group profits.