Low Rates to Impact M&T Bank (MTB) Earnings This Season
M&T Bank Corporation MTB is scheduled to report second-quarter 2020 results on Jul 23, before the bell. The company’s revenues and earnings will likely reflect year-over-year declines.
M&T Bank pulled off an earnings surprise of 26% in the first quarter. The company’s results were supported by higher fee income and improved loan balance. Further, a robust capital position was a tailwind. However, results were affected by a substantial rise in provisions related to the adoption of the accounting method of Current Expected Credit Losses and the coronavirus crisis.
Notably, M&T Bank has a decent earnings surprise history, having surpassed estimates in two of the trailing four quarters for as many misses, the average beat being 3.99%.
MT Bank Corporation Price and EPS Surprise
MT Bank Corporation price-eps-surprise | MT Bank Corporation Quote
Key Factors
Muted Net Interest Income (NII): The overall lending scenario was decent during the April-June quarter, with commercial and industrial, along with real estate loan portfolios having offered significant support. Conversely, as consumer sentiment dipped on the coronavirus concerns, the demand for consumer loans was hit hard.
With the central bank cutting interest rates to near zero in March to support the U.S. economy, M&T Bank’s net interest margin and NII are likely to have been adversely impacted. However, low deposit costs and higher average interest earning assets might have been offsetting factors.
The Zacks Consensus Estimate of $116.8 billion for the second-quarter average interest earning assets suggests a rise of 7.9% from the prior quarter’s reported number.
Per the consensus estimate, overall NII is expected to fall 1.8% to $964 million on a sequential basis.
Impressive Fee Income Growth: The company is anticipated to have witnessed growth in trust revenues on strong equity markets during the to-be-reported quarter. Further, given the lower mortgage rates, M&T Bank is likely to have witnessed an improvement in mortgage loan refinancing activity, in turn boosting fee income. The Zacks Consensus Estimate of $131 million for mortgage banking income calls for a 2.3% sequential improvement during the quarter under review.
Also, it is likely to have registered a rise in service charge on deposits, as deposit balance is expected to increase. Thus, overall growth in other income is projected for the quarter to be reported.
Higher Expenses: While the absence of considerable legal expenses is encouraging, increased investments in technology to improve digital offerings might have escalated costs.
Here is what our quantitative model predicts:
M&T Bank does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is 0.00%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 4, which decreases the predictive power of ESP.
The Zacks Consensus Estimate of $1.91 per share for earnings calls for a 42.8% plunge on a year-over-year basis. Further, sales projection of $1.47 billion suggests a 5.1% decline, year over year.
Banks Worth a Look
Here are a few bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Franklin Resources, Inc. BEN is +5.61% and the stock sports a Zacks Rank of 1, at present. The company is slated to report June quarter-end numbers on Jul 28. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Huntington Bancshares Incorporated HBAN is set to release earnings figures on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +5.62%.
UMB Financial Corporation UMBF is scheduled to release quarterly results on Jul 28. The company has an Earnings ESP of +2.22% and currently holds a Zacks Rank of 3.
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