M&T Shares Fall on Lower-Than-Expected Mortgage Bids

Shares of M&T Bank Corp., the New York bank partly owned by Warren Buffett's Berkshire Hathaway Inc., fell the most since 1998 after the firm cut its earnings forecast because of weaker-than-expected demand for mortgages.

The stock tumbled $9.88, or 8.5 percent, to $105.95 at 4:25 p.m. in New York Stock Exchange composite trading. The Buffalo, New York-based company last week cut its first-quarter profit forecast by $7 million because so-called Alt-A mortgages it tried to sell attracted lower bids than predicted. M&T also said rising defaults mean it must buy back some loans it previously sold.

Shares of mortgage lenders have dropped this year as defaults on subprime loans rose to a four-year high. Companies that offer Alt-A mortgages, a category considered at less risk of default, have said in the past month that investors are mistaking them for subprime lenders and unfairly punishing their shares.

M&T ``is among the first banks to report that recent issues in the subprime arena have, in fact, spread upward to `higher- quality' borrowers,'' wrote Joseph Fenech, managing director at Sandler O'Neill & Partners LP, in a note to investors. ``We would not be surprised to see similar-type pre-announcements from other banks.'' Fenech rates M&T stock a ``hold.''

Shares of IndyMac Bancorp Inc., another Alt-A lender, fell 4.4 percent and rival Impac Mortgage Holdings Inc. fell 5.2 percent. IndyMac's shares have lost almost a third of their value this year and Impac is down 46 percent. M&T Bank has fallen 13 percent in 2007. Today's decline was the biggest since Aug. 31, 1998.

New Century Bankruptcy

Surging defaults in subprime mortgages, those to borrowers with bad credit or high debt, have forced more than 30 lenders to close, cut operations or seek buyers since the start of 2006. New Century Financial Corp. today became the biggest subprime mortgage company to file for bankruptcy in the past year after being overwhelmed by customer defaults.

The loans M&T planned to sell didn't attract the offers the bank expected at auction, the company said on March 30 after the close of regular trading. M&T cut their value, resulting in after-tax costs of 7 cents a share. The loss on the loan buyback will cut profit by another $4 million, or 3 cents a share, the bank said.

``Even excluding the losses on the Alt-A portfolio, MTB still would have missed estimates by a notable margin,'' said A.G. Edwards Inc. analyst David George in a note to clients. He rates the shares ``hold.''

Alt-A mortgages, short for Alternative A, fall shy of the credit criteria of Fannie Mae and Freddie Mac, the two largest sources of mortgage money in the U.S. They often involve loans made with less proof of borrowers' income or assets, purchases of homes by investors or interest-only loans and ``option'' adjustable-rate mortgages, whose payments can fail to cover the interest owed.

M&T said it plans to keep $883 million of Alt-A home loans instead of selling them because management believes the bids don't reflect their true value.
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