M&T Bank (MTB) Gains as Q2 Earnings Beat on Higher Revenues
M&T Bank Corporation’s MTB second-quarter 2023 net operating earnings per share of $5.12 handily surpassed the Zacks Consensus Estimate of $4.11. The bottom line compared favorably with $3.10 earned in the year-ago quarter.
Shares of MTB rallied 3.4% in pre-market trading as better-than-expected results and an increase in deposit balance cheered investors. A full day’s trading will depict a better picture.
Results have benefited from decent loan demand and higher rates, which supported net interest income (NII) growth. An increase in non-interest income and lower provisions acted as tailwinds. However, a rise in adjusted expenses was the undermining factor.
Net income available to common shareholders was $841 million, which soared substantially from $192 million in the prior-year quarter.
Revenues Jump, Adjusted Expenses Rise
M&T Bank’s quarterly revenues were $2.62 billion, outpacing the consensus estimate of $2.39 billion. Also, the reported figure jumped 31% year over year.
NII (tax equivalent) surged 27% year over year to $1.81 billion. Our estimate for the metric was $1.77 billion. The increase was mainly driven by a higher net interest margin (NIM), which expanded 90 basis points (bps) to 3.91%. We had expected NIM to be 3.75% but lower-than-expected rise in deposit costs helped the company achieve higher numbers.
Total non-interest income was $803 million, jumping 41%. The rise was mainly attributable to a $225 million gain on the sale of the CIT business, a rise in mortgage banking revenues and favorable trading and non-hedging derivative gains. Our estimate for the metric was $597.7 million and didn’t include the gain on the sale of the CIT business.
Total non-interest expenses totaled $1.29 billion, down 8%.
Excluding expenses considered to be non-operating in nature, including amortization of core deposit and other intangible assets and merger-related expenses, non-interest operating expenses were $1.28 billion, up 10%. The rise was primarily due to increased salaries and employee benefits expenses, and outside data processing and software costs. These were partially offset by lower professional services expenses.
The efficiency ratio was 48.9%, down from 58.3% in the year-earlier quarter. A lower ratio indicates a rise in profitability.
Loans and leases, net of unearned discount, were $133.3 billion as of Jun 30, 2023, rising marginally from the prior quarter. Total deposits grew 1.2% to $162.1 billion.
Credit Quality Mixed
Net charge-offs increased to $127 million from $50 million in the prior-year quarter.
Nonetheless, non-performing assets declined 7% to $2.48 billion. Also, the ratio of non-accrual loans to total net loans was 1.83%, down year over year from 2.05%.
The company recorded a provision for credit losses of $150 million compared with $302 million in the year-ago quarter. The decline was largely due to the provision recorded in connection with the acquisition of People's United, which was partly offset by lower forecasted commercial real estate values and other loan growth.
Capital Position & Profitability Ratios Strong
M&T Bank’s estimated Common Equity Tier 1 ratio was 10.58%, up from 10.16% as of Mar 31, 2023. The tangible equity per share was $91.58, up from $88.81 as of Mar 31, 2023.
M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity were 1.80% and 22.73% compared with 1.16% and 14.41%, respectively, in the prior-year quarter.
Share Repurchase Update
The company did not repurchase any shares in the second quarter.
Our View
M&T Bank put up an impressive performance in the second quarter. Loan and revenue growth was primarily driven by its acquisition of People's United. The solid loan balance will likely continue aiding organic growth. However, tough operating backdrop, steady rise in funding costs and elevated expenses were headwinds.
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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Citigroup’s C second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
C witnessed a decline in the top line due to lower revenues in the Institutional Clients Group. Also, the higher cost of credit was a spoilsport. Nonetheless, higher revenues in the Personal Banking and Wealth Management segments were a bright spot.
Support from the First Republic Bank acquisition, consumer banking business, higher rates and solid loan balance drove JPMorgan’s JPM second-quarter 2023 adjusted earnings to $4.37 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $3.62.
The results excluded significant items related to the FRC acquisition on May 1 and net investment securities losses. After considering these, JPM’s earnings were $4.75 per share.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Citigroup Inc. (C) : Free Stock Analysis Report
M&T Bank Corporation (MTB) : Free Stock Analysis Report
