M&T Bank Corporation MTB looks like an attractive investment option now. Supported by a solid balance sheet, the company is expected to keep expanding through acquisitions, likely supporting product and balance-sheet diversification. Its solid deposit balances and capital deployment activities are expected to support revenue growth.
Also, analysts seem to be optimistic regarding MTB’s earnings growth prospects. Over the past week, the Zacks Consensus Estimate for the company’s current-year earnings has moved marginally upward. Thus, currently, MTB sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of M&T Bank have gained 17.7% in the year so far against the industry’s fall of 12.8%.
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Some factors that make the stock an attractive investment option are mentioned below.
Earnings Strength: Over the last three to five years, M&T Bank recorded earnings growth of 6.3%. The upward momentum is expected to continue in the near term. While in 2022, the company’s earnings are projected to decline 4.5%, it is likely to recover in 2023 and increase 27.8%.
Revenue Growth: M&T Bank’s organic growth trajectory looks impressive. Driven by a continued rise in loan and deposit balances, the company’s net interest income (NII) witnessed a compound annual growth rate (CAGR) of 5.1% over the last seven years (2015-2021). Also, M&T Bank’s non-interest income saw a five-year CAGR of 2.7% (2017-2021), backed by growth in mortgage banking revenues, brokerage service income and trust income. These have supported revenue growth in the past.
The momentum is likely to continue in the near term. For 2022, revenues are projected to increase 24.7%, whereas, for 2023, the top line is expected to grow 14.3%.
Inorganic Growth Efforts: Given its robust liquidity position, M&T Bank is well-positioned to grow via acquisitions. This growth has been reflected in the company’s accomplishment of several major acquisitions in and out of the United States in the past several years.
In April 2022, M&T Bank completed the acquisition of People's United for $8.3 billion and expects to realize cost savings of $330 million by early 2023, with the deal to be accretive to earnings.
Favorable Capital Deployment Plans: M&T Bank’s capital deployment activities remain impressive. The company has come a long way in displaying its capital strength and hiked its quarterly dividends by 9.1% in November 2021. In February 2022, the board of directors re-authorized the repurchase of $800 million of shares of common stock. The company’s consistent performance and favorable debt/equity ratio when compared with the broader industry indicate that these capital deployment actions seem sustainable.
Other Stocks Worth a Look
A couple of other top-ranked stocks in the banking space are Cullen/Frost Bankers, Inc. CFR and Civista Bancshares, Inc. CIVB. CFR currently sports a Zacks Rank of 1, while CIVB carries a Zacks Rank of 2 (Buy).
Cullen/Frost Bankers Zacks Consensus Estimate for current-year earnings has been revised 6.9% upward over the past 30 days. Over the past six months, shares of CFR have gained 1.6%.
Civista Bancshares also witnessed a 3% upward earnings estimate revision for 2022 over the past 30 days. Over the past six months, shares of CIVB have declined 11.1%.
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