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M&T Bank (MTB) Q1 Earnings Beat on Lower Costs & Provisions

Zacks Equity Research

M&T Bank Corporation MTB delivered a positive earnings surprise of 2.7% in first-quarter 2019 led by expansion of margins and improved cost management. Net operating earnings of $3.38 per share surpassed the Zacks Consensus Estimate of $3.29. Also, the bottom line improved 50% year over year.

The company’s results reflect robust organic growth during the quarter. It recorded rise in net interest income with support from margin expansion and loan growth. Further, improved credit quality and decline in expenses were other positive factors.

Net operating income came in at $486 million, up around 36.1% from $357 million recorded a year ago.

On a GAAP basis, M&T Bank reported first-quarter net income of $483 million or $3.35 per share compared with $353 million or $2.23 in the prior-year quarter.

Revenues Increase, Loans Climb, Expenses Decline

M&T Bank’s revenues came in at $1.55 billion, comparing favorably with the year-ago figure of $1.43 billion. Also, it surpassed the consensus estimate of $1.51 billion.

Taxable-equivalent net interest income increased 8% year over year to $1.06 billion in the quarter driven by higher net interest margin, partly offset by lower average earning assets. Furthermore, net interest margin expanded 33 basis points to 4.04%.

The company’s non-interest income came in at $501 million compared with $459 million in the year-ago quarter. Higher mortgage banking revenues and valuation gains on equity securities were partially offset by lower brokerage services income.

Non-interest expenses were $894 million, down nearly 4% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $889 million, down 4%. The decline was mainly attributable to lower FDIC assessments charges, partially offset by higher salaries and employee benefits expenses.

Efficiency ratio came in at 57.6%, down from 64% in the prior-year quarter. Lower ratio indicates rise in profitability.

Loans and leases, net of unearned discount, registered slight sequential growth to $88.6 billion at the end of the reported quarter. Also, total deposits increased marginally to $90.5 billion.

M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.76% and 19.56%, respectively, compared with 1.28% and 13.51% recorded in the prior-year quarter.

Impressive Credit Quality

Provision for credit losses declined 49% year over year to $22 million. Also, net charge-offs of loans came in at $22 million, down 45%.

The ratio of non-accrual loans to total net loans was 0.99%, flat year over year. Non-performing assets decreased marginally to $963 million.

Capital Position

M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were around 10.05%. Tangible equity per share came in at $71.19, up 6.3% year over year from $66.99.

Share Repurchase

During the March-end quarter, M&T Bank repurchased a total of 2.15 million shares of its common stock for a total cost of $366 million.

Our Viewpoint

M&T Bank’s results display impressive performance in the quarter. Considerable improvement in credit quality was a major tailwind. Also, expansion of margin and rise in loans balance continues to boost interest income. We believe the company, with its sturdy business model and strategic acquisitions, is well poised for growth.

M&T Bank Corporation Price, Consensus and EPS Surprise

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

PNC Financial PNC pulled off positive earnings surprise of 0.8% in first-quarter 2019. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflects a 7.4% jump from the prior-year quarter.

First Republic Bank FRC delivered a positive earnings surprise of 3.3% in first-quarter 2019, reflecting higher revenues. Earnings per share came in at $1.26, outpacing the Zacks Consensus Estimate of $1.22. Moreover, the bottom line improved 11.5% from the year-ago figure.

Commerce Bancshares CBSH reported first-quarter 2019 earnings per share of 85 cents, which lagged the Zacks Consensus Estimate of 91 cents. Moreover, the figure compares unfavorably with the prior-year quarter’s earnings of 88 cents.

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