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

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M&T Bank Corporation MTB 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 MTB. However, a fall in net interest income (NII), net interest margin, 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 net interest margin contracted 32 basis points (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 of loans 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 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.

Our Viewpoint

M&T Bank put up a decent performance in the first quarter. The contraction of margins and elevated expenses were headwinds. The fall in loan balance might hurt organic growth in the days to come. Nonetheless, a sturdy business model and acquisitions poised it well for growth.

M&T Bank Corporation Price, Consensus and EPS Surprise

M&T Bank Corporation Price, Consensus and EPS Surprise
M&T Bank Corporation Price, Consensus and EPS Surprise

M&T Bank Corporation price-consensus-eps-surprise-chart | M&T Bank Corporation Quote

Currently, M&T Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

The PNC Financial Services Group, Inc. PNC pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. However, the bottom line decreased 20% year over year.

Higher NII, driven by interest-earning assets and loan growth, was a tailwind for PNC Financial. However, higher expenses and a decline in deposits dragged the results.

U.S. Bancorp USB reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

Fifth Third Bancorp FITB reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.


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