The economic environment prevailing at the time of our 2008 results announcement has continued to deteriorate in the intervening period. Key features of our overall performance in the year to date are:

 *        A resilient operating profit before bad debt provisions *        Increased provisions as asset quality continues to weaken *        Continued focus on funding our business in markets that   remain dislocated 

In the US, M&T continues to outperform its peers and achieved net income of $64m in the first quarter of 2009 despite increasing its impairment and provision charges.

OPERATING PROFIT

Profit before bad debt provisions has been good in the year to date and up on the corresponding period in 2008. However, this outcome benefited from base period effects, most notably higher costs in the early part of 2008. The outcome reflects the very strong performance of Capital Markets and Global Treasury in particular, driven by interest rate management activities. This performance is continuing and will be a positive factor for the full year. Performance in our other operating divisions is in line with our expectations and therefore down relative to the same period last year. For the group overall, both costs and income are down in the year to date. Costs are being very actively managed and are down by a higher percentage rate than income at this point. Downward pressure on income is expected as the year progresses due to a continuation of poor economic conditions and dislocated funding markets.

* Loan and deposit volumes

Demand for credit remains weak and loan balances remain broadly in line with the end of last year in each division. In our Republic of Ireland business there has been a recent pick up in home mortgage applications but no material increase as yet in drawdowns. This increased activity reflects an attractive customer offering and very weak competitor presence in the market

Customer deposits have stabilised in recent weeks following some outflows earlier in the year. In the current recessionary conditions balances in current (money transmission) accounts have reduced. In Poland, our deposits are broadly stable and continue to exceed our loans.

Customer resources, which include deposit and current accounts, are down by around 10% in the first four months of this year. This mainly reflects seasonal factors and outflows from our foreign institutional deposit base earlier in the year and a reduction from what was a very strong position at the end of 2008. Customer resources were up c. 9% year on year at the end of the first quarter.

* Margins

In highly competitive markets and a low interest rate environment, customer deposit margins continue to contract. The elevated price of wholesale market funding is also having an adverse effect on the net interest margin. Though negative effects are being partly offset by better margins on our lending, overall the net interest margin is expected to reduce this year.

* Non-Interest Income

Lower fees from banking activity, investment banking and asset management and the cost of the Government Guarantee Scheme are expected to adversely affect non-interest income for the full year.

* Costs

Cost management is a key priority in the current difficult revenue environment. All expense categories across our business are being closely monitored and controlled.