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M&T Bank (MTB) Rallies 20% YTD: What's Driving the Stock?

Zacks Equity Research

Rising optimism over progress in U.S.-China trade talks and the Federal Reserve clearing some air on its plan to not raise rates again in the short term have driven the stock market rally so far in 2019.

Further, riding on higher rates, improved lending margins along with lesser regulations under the Trump administration, the finance sector has emerged triumphant. Therefore, these stocks have performed decently to record positive gains.

One such stock is M&T Bank Corporation MTB, which has rallied nearly 20% year to date compared with the S&P’s growth of 11.3%.

This price performance is backed by an improving operating environment along with inorganic growth strategies, such as expansion of mortgage servicing business that will help boost M&T Bank’s top line.

Further, the company continues to witness solid organic growth in the form of higher revenues. Notably, with rising rates, margin pressure also seems to be easing. Also, M&T Bank enjoys diverse fee income sources and operates as a solid and sustainable regional bank franchise with a footprint that spans seven Mid-Atlantic States as well as DC. Total revenues for full-year 2019 are projected to rise 3.8%.

Additionally, M&T Bank displays robust liquidity position as its loans and deposits have consistently risen in the past few years. Deposits recorded a five-year CAGR of 9.4% (2014-2018), aided by rising savings and non-interest-bearing deposits. Further, loans recorded a CAGR of 6.9% in 2018. The uptrend is likely to continue in the upcoming quarters driven by improving economic environment.

Also, M&T Bank’s favorable debt/equity ratio when compared to the broader industry along with consistent performance indicates that its capital deployment activities are sustainable. We believe such activities will continue to inspire investors’ confidence in the stock.

Further, the analysts are bullish on this Zacks Rank #2 (Buy) stock as it has been witnessing solid upward estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for earnings has been raised 3.6% and 2.6% for 2019 and 2020, respectively.

M&T Bank’s earnings have increased 11% annually over the last three to five years. This earnings momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth rate of 13.7% for 2019 and 6.4% for 2020.

Moreover, the stock has a Growth Score of B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.

Other Stocks to Consider

Signature Bank’s SBNY Zacks Consensus Estimate for current-year earnings has been revised 1.1% upward, over the past 60 days. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Camden National Corporation CAC has witnessed 1.4% upward estimate revision for current year over the past 60 days. It currently carries a Zacks Rank of 2.

Western Alliance Bancorporation WAL has witnessed 2.4% upward estimate revision for current year over the past 60 days. It currently carries a Zacks Rank of 2.

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