What's in the Cards for M&T Bank (MTB) in Q3 Earnings?
M&T Bank Corporation MTB is scheduled to report third-quarter 2023 results on Oct 18, before the opening bell. The bank’s earnings and revenues are expected to have witnessed year-over-year improvements.
In the last reported quarter, M&T Bank surpassed the Zacks Consensus Estimate on a rise in net interest income (NII), supported by decent loan demand and higher rates. Other income improved in the quarter. However, a rise in adjusted expenses was the undermining factor.
The stock has surpassed the consensus estimate in three of the trailing four quarters and missed once. It has a four-quarter negative earnings surprise of 5.14%, on average.
M&T Bank Corporation Price and EPS Surprise
M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote
Key Factors & Q3 Estimates
Loans & NII: Demand for commercial and industrial loans remained muted in July and August, per the Fed’s latest data. Moreover, commercial real estate loans declined in July and August from the second-quarter end. Nonetheless, the demand for consumer loans was decent during the same time. Given M&T Bank’s substantial exposure to commercial loans, its loan growth in the quarter under review is likely to have been affected.
The Zacks Consensus Estimate for average earning assets of $189.87 billion indicates a sequential rise of 2.1%. We estimate average interest-earning assets of $200.5 billion.
The Federal Reserve raised the interest rates by another 25 basis points in the quarter under review. Thus, the policy rate reached 5-5.25% in July 2023, marking the 11th time FOMC has hiked interest rates in a tightening process that began in March 2022. In September, the rate hike was paused. With this, interest rates reached a target of 5.25-5.5% in the third quarter, marking the highest level in around 22 years.
Despite the high interest rate environment, softer loan demand, and higher deposit and wholesale funding costs are anticipated to have negatively impacted NII in the quarter to be reported.
The company expects NII to decline sequentially to $1.765-$1.775 billion from the $1.81 billion reported as of the second-quarter end.
The Zacks Consensus Estimate for NII of $1.75 billion suggests a 2.7% decrease from the prior quarter’s reported number. We estimate the metric to be $1.73 billion.
Fee Income: Trust income is likely to have declined in the to-be-reported quarter due to the sale of its collective investment trust (CIT) business. The Zacks Consensus Estimate for the metric of $155 million indicates a 10% sequential decline.
The consensus estimate for trading account and other non-hedging derivative gains is pegged at $12.92 million, indicating a sequential decline of 22.9%.
The consensus mark for other revenues from operations is pegged at $151 million, implying a sequential fall of 5.6%.
As of the end of August, MTB’s average deposit balances sequentially increased 2% to $162.5 billion. However, the removal of non-sufficient fund fees and overdraft protection transfer charges from linked-deposit accounts is likely to have continued affecting revenues from service charges on deposits in the to-be-reported quarter. The consensus estimate for the metric is pegged at $117 million, indicating a sequential 1.7% fall.
In the third quarter, mortgage rates continued to increase, with the rate on a 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing, than the prior-year quarter. Nonetheless, an improvement in the mortgage servicing rights valuation is likely to have offered support. The Zacks Consensus Estimate for mortgage banking revenues of $107 million suggests no sequential change.
The Zacks Consensus Estimate for brokerage services income of $24.19 million suggests a 3.7% decline from the second-quarter reported figure.
We expect total fee income to be $552.4 million in the third quarter, indicating a sequential decline of 31.2%.
Expenses: The company’s expense base is expected to have declined sequentially in the to-be-reported quarter due to lower expenses related to the sale of the CIT business. Management expects operating expenses to be sequentially down 1-2% to $1.255-$1.270 billion. This excludes an estimated $183 million FDIC special assessment and intangible amortization expenses. We estimate total expenses of $1.25 billion.
What Our Quantitative Model Predicts
Our proven model predicts an earnings beat for M&T Bank this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is +2.61%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Q3 Earnings & Sales Projections
Prior to the third-quarter earnings release, the company is witnessing downward estimate revisions, reflecting bearish analyst sentiments. The Zacks Consensus Estimate for third-quarter earnings has been unrevised in the past month. Nonetheless, the figure suggests a year-over-year rise of 2%.
The consensus estimate for revenues of $2.32 billion suggests a rise of 3.5% from the year-ago quarter’s reported level.
Other Stocks That Warrant a Look
First Citizens BancShares, Inc. FCNCA and The PNC Financial Services Group, Inc. PNC are a couple of other stocks that you may want to consider, as these have the right combination of elements to post an earnings beat this season.
The Earnings ESP for FCNCA is +3.95% and currently sports a Zacks Rank #1. It is slated to report third-quarter 2023 results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s third-quarter earnings has moved marginally north over the past week.
PNC is scheduled to release third-quarter 2023 results on Oct 13. It currently has an Earnings ESP of +1.26% and a Zacks Rank #3.
The Zacks Consensus Estimate for PNC’s third-quarter earnings has moved marginally south over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
M&T Bank Corporation (MTB) : Free Stock Analysis Report
First Citizens BancShares, Inc. (FCNCA) : Free Stock Analysis Report
