The Cost Of Being A High-Quality Bank

I haven’t yet written about the cross-selling scandal at Wells Fargo because I suspect there are more relevant facts that will come out, and I want to analyze them before I publicly share my opinion on the surprising business development. But I do want to use the Wells Fargo news to tackle an ancillary question: “Why would a conservatively managed bank feel pressure to goose earnings?”

The best way to answer that question is through example by looking at the story of M&T Bank (MTB).

If someone asked me to build a portfolio of 50 “buy and hold” forever investments where each of the 50 spots had the lowest possible risk of bankruptcy or permanent capital impairment, M&T Bank would make the list.

It has an absurdly strong balance sheet that could weather 5x as many defaults as it experienced during the recession years of 2008, 2009, and 2010. The … Read the rest of this article!