Bank executives never know what to expect when they face analysts.
René Jones, chief financial officer at M&T Bank, may have expected to be peppered with questions, once again, on the Buffalo, N.Y., companys long-delayed purchase of Hudson City Bancorp.
Instead, Jones got an earful Thursday morning about, of all things, a charitable donation.
The $97 billion-asset company contributed $40 million to the M&T Charitable Foundation during the second quarter. The organization has supported worthy causes, such as providing financial help to refugees in the Baltimore area from war-torn countries and free admission to art galleries in the banks hometown.
The donation is tax deductible, but the gift contributed to noninterest expenses that rose 4% from a year earlier, to $697 million.
Brian Klock, an analyst at Keefe, Bruyette & Woods, wanted to know if investors should expect more contributions to the foundation in the second half of this year. Klock pointed out that M&T had already contributed $6 million to the foundation during the first quarter.
Other analysts, including Ken Usdin at Jefferies, Frank Schiraldi at Sandler O'Neill and Sameer Gokhale at Janney Capital Markets, asked pointed questions about M&T's efficiency ratio, which worsened by 3 basis points, to 58.23% at June 30.
Jones attributed the decision to a windfall, of sorts, that came from selling a trade-processing business it inherited from its purchase of Wilmington Trust. After deciding that the business wasn't core to its mission, M&T sold it and applied the money to the charity, he said.
"It just made sense to us to take those proceeds and put them into something that is really important to us in the foundation," Jones added.
Jones reminded analysts that there have been other instances where M&T took unexpected money and redirected it to the foundation. The company, which recently recovered $50 million to $60 million from lawsuits tied to collateralized-debt obligations, sent some of those funds to the foundation.
Jones seemed slightly defensive in his response to questions about high costs, saying there were things M&T finds necessary to invest in, such as technology. Otherwise, M&T is trying to manage its finances without overspending, he said.
"I just feel like we have very, very good ability to manage our expenses prudently while making the investments we need from the point we are at here," Jones said.
As for Hudson City, some analysts asked for a status update.
David Darst, an analyst at Guggenheim Securities, asked if M&T had completed all the work tied to improving its systems for anti-money laundering compliance, adding if the company was simply waiting to hear back from federal regulators.
"We've made a tremendous amount of progress and we are very, very pleased with the progress we've made and in the time frame we've made it," Jones said. "That is sort of what we committed to do. So now, weve got to see what happens."
Gerard Cassidy, an analyst at RBC Capital Markets, asked if the issues raised about Hudson City's compliance with the Community Reinvestment Act were being handled exclusively by the Paramus, N.J., company, or if M&T was also working to address that problem.
M&T and Hudson City "are definitely two separate entities today," Jones said. "So we run our own franchises and we manage our own franchises."
Hudson City is scheduled to report second-quarter earnings on July 29.