What's in Store for M&T Bank (MTB) This Earnings Season?
M&T Bank Corporation MTB is slated to report fourth-quarter and full-year 2023 results on Jan 18, before the opening bell. The company is expected to have witnessed year-over-year decline in quarterly revenues and earnings.
In the last reported quarter, M&T Bank surpassed the Zacks Consensus Estimate on a rise in net interest income (NII), aided by higher rates. A fall in expenses was also a driving factor. However, a decrease in non-interest income and higher provisions acted as headwinds.
MTB’s earnings surpassed the consensus estimate in each of the trailing four quarters. The surprise was 8.09%, on average.
M&T Bank Corporation Price and EPS Surprise
M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote
The company’s business activities and prospects in the to-be-reported quarter have not encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for MTB’s fourthquarter earnings of $3.70 has inched down nearly 1% over the past seven days. The figure indicates a decline of 19% from the year-ago number.
The consensus estimate for sales is pegged at $2.28 billion, which suggests a decrease of 9.3% from the prior-year levels.
Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s discuss the factors likely to have impacted the company’s quarterly performance.
Key Factors & Estimates for Q4
Loans & NII: Per Fed’s latest data, demand for commercial and industrial loans weakened in the first two months of the quarter under review from third-quarter 2023 figures. Nonetheless, demand for commercial and residential real estate loans improved in November from third-quarter 2023 levels. Also, consumer lending showed some signs of advancement throughout November. Hence, we believe loan growth for M&T Bank is likely to have been modest.
This is likely to have positively impacted average interest earning assets during the quarter. In fact, the Zacks Consensus Estimate for average interest-earning assets is pegged at $190.56 billion, suggesting nearly 1.7% increase from the prior quarter’s reported figure.
Also, while Federal Reserve paused interest rate hikes during fourth-quarter 2023, interest rates remained at a 22-year high of 5.25-5.5%. 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.
Management projects NII (tax equivalent basis) in the range of $1.71-$1.74 billion. The Zacks Consensus Estimate for NII (tax equivalent basis) of $1.73 billion suggests a 3.5% decrease from the prior quarter’s reported number. We estimate the metric to be $1.71 billion.
Fee Income: MTB’s total deposit balances sequentially increased to $164.13 billion in the third quarter of 2023. The uptrend is likely to have continued during the fourth quarter. 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 deposit accounts in the to-be-reported quarter.
The consensus estimate for the metric is pegged at $119 million, indicating a sequential fall of 1.7%.
In the quarter under review, mortgage rates started to decrease, with the rate on a 30-year fixed mortgage declining to 6.62% as of Dec 31, 2023, from 7.31% recorded at the beginning of the quarter. Though mortgage rates declined, they remain sufficiently high, keeping home buyers on the sidelines. This is likely to have led to a smaller origination market, both purchase and refinancing, compared with the prior quarter.
These factors are expected to have lowered M&T Bank’s mortgage banking revenues in the quarter under discussion. The Zacks Consensus Estimate is pegged at $98 million, indicating a 6.7% decrease from the prior quarter’s reported figure.
The Zacks Consensus Estimate for brokerage services income of $26.12 million suggests a 3.3% decline from the third-quarter 2023 figure. Our estimate for the metric is pegged at $21.3 million.
The Zacks Consensus Estimate for trust revenues of $155 million is expected to remain flat from third-quarter actuals. We suggest the metric to be $153.8 million.
The consensus estimate for trading account and other non-hedging derivative gains is pegged at $10.87 million, indicating a sequential rise of 20.8%. We estimate the metric to be $10.8 million.
The consensus mark for other revenues from operations is pegged at $150 million, implying a sequential rise of 4.9%.
Overall, management expects non-interest income to be essentially flat compared with the third quarter of 2023 levels. However, the Zacks Consensus Estimate for the metric of $558 million suggests a marginal decline from the third-quarter 2023 figure. We forecast the same to be $555.4 million in the quarter, indicating a sequential decline of nearly 1%.
Expenses: The company’s escalating expense base is expected to have impeded bottom-line growth during the fourth quarter. Management expects expenses in the range of $1.25-$1.27 billion. This excludes an estimated $183 million FDIC special assessment and $15 millionintangible amortization expenses.We estimate total expenses to be $1.42 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 +1.01%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Other Stocks That Warrant a Look
A couple of other finance stocks, which you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model, are Associated Banc-Corp ASB and Independent Bank Corporation IBCP.
ASB is scheduled to release quarterly earnings on Jan 25. The company has a Zacks Rank #3 and an Earnings ESP of +5.36% at present.
IBCP is slated to report quarterly results on Jan 25. It has an Earnings ESP of +8.45% and sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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M&T Bank Corporation (MTB) : Free Stock Analysis Report
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