Investment gains helped M&T Bank Corp. (MTB) in Buffalo, N.Y., record a profit increase.

The $83.2 billion-asset company posted a profit of $348 million for the second quarter, 49% higher than in the second quarter of 2012. Per-share earnings of $2.55 beat the expectations of analysts polled by Bloomberg by 46 cents.

M&T's strong quarter was driven by gains on the sale of its holdings in Visa and MasterCard, which brought in $103 million. Including this gain, M&T's noninterest income rose 30%, to $508.7 million. Mortgage banking revenue rose 31%, to $91.3 million, and trading and foreign-exchange gains rose 48%, to $9.2 million. The bank's gain on Visa and MasterCard sales was partially offset by a $46 million loss on the sale of privately issued collateralized mortgage debt.

M&T's net interest income was $677.6 million, 5% higher than in the second quarter of 2012, despite a tightening of its net interest margin by 3 basis points, to 3.71%. Its portfolio of  loans and leases grew by 7%, to $66 billion.

M&T's expenses related to bad loans remained roughly level, as its provision for loan losses dipped to $57 million, $3 million lower than in the year-prior period, while chargeoffs rose to $57 million, $5 million higher.

M&T's noninterest expense fell 4%, to $599 million, due largely to the amortization of deposits and other assets and lower costs related to the Federal Deposit Insurance Corp.'s assessment of foreclosed assets.

M&T's $3.7 billion deal to acquire Hudson City Bancorp (HCBK) is on hold after the Federal Reserve Board issued an enforcement action requiring M&T to improve its anti-money-laundering controls. The two companies have pushed back the completion date of the deal, and M&T Chief Financial Officer Rene Jones said in April that he was optimistic it would go through.

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