M&T Bank (NYSE:MTB)
Our growth thesis for M&T Bank was predicated on the company’s ability to maintain its historically successful inorganic growth strategy. We purchased the stock in mid-2013 as the Company moved forward with it’s acquisition of Hudson City Bank (announced in August 2012). More than three years later, after extensive AML/BSA expenses (the company spent over $150 million to improve these systems in 2014 alone) and four extensions to the closure date, regulatory approval was finally granted and the acquisition was complete. Of note in the Fed’s approval, however, was a restriction stipulating that M&T Bank must fully integrate the Hudson City deal and cure all BSA deficiencies fully before pursuing further growth through acquisition. We fully expect the Company to follow through on the Fed’s requirements, but given how cumbersome and expensive it has been to integrate this acquisition, we are not convinced that future acquisitions will be any less cumbersome. Furthermore, we are concerned that future returns on acquisitions will be much lower than we initially expected. As such, we liquidated our holdings in M&T Bank.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners 1st Quarter 2016 Client Letter.
