What a difference two years and an acquisition make. It certainly did for M&T Bank, which acquired Wilmington Trust in May 2011 to boost its flagging wealth management business.
In 2012, M&T generated $546 million in wealth management income, nearly three times the $187 million it produced prior to the acquisition of the trust company powerhouse.
"As far as acquisitions go in the bank space, this was definitely viewed as a good acquisition," said Peter Winter, an analyst and a managing director at BMO Capital Markets.
The combination helped each organization gain strength in areas in which they were weak. M&T Bank bolstered its wealth management business, while Wilmington Trust strengthened its lending business, Winter said.
For M&T Bank especially, the acquisition was a coup as it gained a top 10 trust company at what analysts say was a fire-sale price. At the end of the second quarter of 2012, Wilmington Trust had approximately $18.5 billion in personal trust assets, ranking ninth among the top 50 banks for private assets, according to Donnie Ethier, a senior analyst with Cerulli Associates. "It's clear why M&T was interested in the business," he said.
In addition to reinvigorating its wealth business, M&T Bank gained instant deposit market share in the mid-Atlantic, a market it had sought to move into, noted Winter. "It fit in with what they like to do," he said.
Michael White, president of Michael White Associates, a consulting and research firm based in Radnor, Pa., also viewed the deal as "a positive story."
At the end of 2010, before the organizations merged, Wilmington Trust and M&T Bank jointly generated $517 million in wealth management income (Wilmington produced $331 million and M&T Bank generated $187 million). By the end of 2012, the merged entity generated $546 million, up 5.6% or $29 million, according to White's analysis in the Michael White IPI Bank Wealth Management Report.
It wasn't a straight line to success, however, White noted. In 2011, the merged entity generated only $484 million, less than they produced when they operated separately.
"It appears it took them some time to execute the merger," which White said in an email "cost them some business in 2011."
In the third quarter of 2013, M&T Bank generated $137 million in trust and brokerage revenue, up 5% from the year-ago quarter, according to Winter's analysis of the bank's latest earnings release.
"Five percent growth is decent growth," Winter said. "We're looking for 8% growth overall this year."
Will the deal inspire other regional banks to scoop up trust companies? Winter thinks it's unlikely. The Wilmington Trust acquisition was "a rarity," he said. He does, however, see more consolidation in the banking industry overall, particularly among smaller banks struggling with higher regulatory costs and low interest rates.
Cerulli's Ethier isn't so sure. He sees a possible trend going forward of banks spinning off trust companies or acquiring trust companies as a way to bolster wealthy people's impression of their ability to serve them.
One of the reasons M&T Bank pursued Wilmington Trust was to increase its advisor talent and shore up its capability to address the high-net-worth space a reason that might drive other banks to try the same, Ethier said.
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