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M&T Bank Corporation (MTB) Down 8.4% Since Last Earnings Report: Can It Rebound?

·5 min read

It has been about a month since the last earnings report for M&T Bank Corporation (MTB). Shares have lost about 8.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is M&T Bank Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

M&T Bank Q1 Earnings Beat, NII Dips on Lower Loans

M&T Bank has reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, the bottom line compares unfavorably with the $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII, net interest margin (NIM), and a rise in expenses were the key undermining factors.

Net income available to common shareholders in the reported quarter was around $340 million, down 21% from the prior year.

Revenues Decline as NII Falls, Expenses Rise

M&T Bank’s quarterly revenues totaled $1.45 billion, missing the consensus mark of $1.46 billion. The reported figure decreased 2% year over year.

The NII decreased 7.9% year over year to $904.2 million in the first quarter. This was due to lower outstanding average loan balances, yield on average earning assets and margin. The NIM contracted 32 bps to 2.65%.

The company’s non-interest income was $541 million, up 7% year over year. A rise in service charges on deposit accounts, trust income and brokerage services’ income resulted in the upside.

Non-interest expenses totaled $960 million, flaring up 4% from the prior-year period. The upsurge mainly stemmed from higher salaries and employee benefits, outside data processing and software expenses, and FDIC assessments costs.

The efficiency ratio was 64.9%, up from 59.7% recorded in the year-earlier quarter. A higher ratio indicates a decline in profitability.

Loans and leases, net of unearned discount, were $91.8 billion at the end of the reported quarter, down 1.2% from the prior quarter. Also, total deposits declined 4% to $126.3 billion.

Credit Quality Deteriorates

For M&T Bank, credit metrics were a mixed bag in the first quarter. Net charge-offs declined 91% on a year-over-year basis to $7 million.

However, the ratio of non-accrual loans to total net loans was 2.32%, up from 1.97% year over year. Non-performing assets rose 9% to $2.16 billion. The company recorded a provision for credit losses of $10 million against a recapture of $25 million in the year-ago quarter.

Capital Position Strong, Profitability Falls

M&T Bank’s estimated Common Equity Tier 1 (CET1) ratio was 11.6%, up from 10.4% as of Mar 31, 2020. Tangible equity per share was $89.33, up from $82.35 as of Mar 31, 2020.

M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity of 1.04% and 12.44%, respectively, compared with 1.29% and 17.05% recorded in the prior-year quarter.

2022 Outlook

All assumptions are made on a combined basis.

Management projects loans to grow in the 3-5% range from the beginning of the second quarter for 2022. Excluding the impact of paycheck protection program (PPP) and Ginnie Mae buyouts, loans are expected to grow in 4-6% range.

Management expects average loans to grow in the 24-26% range when compared to stand-alone full-year 2021.

Commercial real estate loans are expected to remain flat for the rest of this year due to the heightened level of payoffs. Management expects commercial and industrial loan growth (excluding PPP loans), to be in the 4-6% range. Consumer loan portfolio is anticipated to growth in the 7-9% range. PPP loans are expected to continue to pay down over the year and not have a material impact on loan growth.

The company’s mortgage retention strategy is expected to help drive 7-8% loan growth in residential mortgage balances in 2022. Further, excluding the impact of Ginnie Mae buyouts, loan growth in residential mortgage balances is expected to be in 12-14% range.

Investment securities are expected to grow by $2 billion per quarter.

NII, on FTE basis, is expected to grow 48-52%, depending on the speed of interest rate hikes by the Fed, the pace of the deployment of excess liquidity and loan growth.

Management expects non-interest revenues to grow in 11-13% range. Further, foregone revenues from the repricing of consumer checking products are expected to reach a run rate of $15 million per quarter by the second half of the year.

Interest-earning cash is expected to be slightly lower than $30 billion.

Operating expense growth is estimated in the 23-26% range (excluding pre-tax merger-related charges).

Management expects net charge-offs ratio to be around 20 bps.

CET1 ratio is anticipated to be approximately 10.5%.


How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 6.06% due to these changes.

VGM Scores

At this time, M&T Bank Corporation has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise M&T Bank Corporation has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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