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M&T Bank (MTB) Q2 Earnings Meet Estimates, NII Rises on Loans

M&T Bank Corporation MTB has reported net operating earnings per share of $3.10 for second-quarter 2022, meeting the Zacks Consensus Estimate. However, the bottom line compares unfavorably with the $3.45 per share reported in the year-ago period.

A rise in net interest income (NII) on net interest margin expansion and balance sheet strength drove MTB’s results. Yet a rise in expenses was a key undermining factor.

Per management, “Higher average earning assets and the benefits from an increased net interest margin helped drive revenue growth, while expenses remained well controlled. Although financial results for the recent quarter reflect significant merger-related expenses, the acquisition has already had a positive impact on M&T's net operating results.”

Net income available to common shareholders in the reported quarter was around $192 million, down 56% from the prior year.

Revenues Jump on NII Rise, Expenses Flare Up

M&T Bank’s quarterly revenues totaled $1.98 billion, missing the consensus mark of $2.03 billion. Nonetheless, the reported figure increased 35.6% year over year.

NII on a taxable-equivalent basis increased 50% year over year to $1.4 billion in the second quarter. This was due to a higher net interest margin and the impact of earning assets from the People's United acquisition. The net interest margin expanded 36 basis points (bps) to 3.01%.

The company’s non-interest income was $571 million, up 11% 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 $1.4 billion, flaring up 64% from the prior-year period. The upsurge mainly stemmed from the impact of the acquisition of People's United, higher salaries and employee benefits, outside data processing and software expenses, and FDIC assessment costs.

The efficiency ratio was 58.3%, up from 58.4% in the year-earlier quarter. A lower ratio indicates a rise in profitability.

Loans and leases, net of unearned discount, were $128.5 billion at the end of the reported quarter, up 40% from the prior quarter. Also, total deposits rose 35% to $170.4 billion.

Credit Quality Deteriorates

For M&T Bank, credit metrics declined in the second quarter. Net charge-offs increased 8% on a year-over-year basis to $50 million. Non-performing assets rose 17% to $2.66 billion. The company recorded a provision for credit losses of $302 million against a recapture of $15 million in the year-ago quarter.

Nonetheless, the ratio of non-accrual loans to total net loans was 2.05%, down from 2.31% year over year.

Capital Position Strong, Profitability Falls

M&T Bank’s estimated Common Equity Tier 1 ratio was 11.9%, up from 10.7% as of Jun 30, 2020. Tangible equity per share was $85.78, up from $84.47 as of Jun 30, 2021.

M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity of 1.16% and 12.41% compared with 1.27% and 16.68%, respectively, recorded in the prior-year quarter.

Capital Deployment Update

The company repurchased 3.5 million shares of its common stock in the second quarter for $600 million.

Our Viewpoint

M&T Bank put up a decent performance in the second quarter. Balance sheet and revenue growth was primarily driven by its acquisition of People's United. The rise in the loan balance might aid organic growth in the days to come. However, declining credit quality and elevated expenses were headwinds.

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Citigroup Inc.’s C second-quarter 2022 income from continuing operations per share of $2.30 have handily outpaced the Zacks Consensus Estimate of $1.67. However, the reported figure declined 19% from the prior-year quarter.

Citigroup witnessed growth in NII and non-interest revenues. However, declines in investment banking revenues, loans and deposits were spoilsports.

Truist Financial’s TFC second-quarter 2022 adjusted earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.17. However, TFC’s bottom line declined 22.6% from the prior-year quarter.

TFC’s results were aided by average loan growth and higher rates, which drove NII. However, lower non-interest income and a rise in provisions were the major headwinds.

Citizens Financial Group CFG has reported second-quarter 2022 underlying earnings per share of $1.14, surpassing the Zacks Consensus Estimate of $1.02. However, the bottom line fell 22% from the year-ago quarter figure.

CFG’s results reflect NII growth on the rise in loan balances. Further, strong balance sheet growth, backed by an improving economy, was a tailwind. Citizens Financial closed the Investors Bancorp acquisition on Apr 6, 2022. However, a rise in expenses was a spoilsport.

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