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M&T Bank (MTB) Q2 Earnings Up on Higher Interest Income
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M&T Bank Corporation’s (MTB - Free Report) net operating earnings of $2.07 per share for second-quarter 2016 improved 3% year over year on higher net interest income. However, the reported figure missed the Zacks Consensus Estimate by a penny.
Higher expenses and a rise in provision for loan losses were primarily responsible for the earnings miss. Nevertheless, revenues improved driven by growth in net interest income that benefited from the Hudson City Bancorp acquisition. Also, the quarter witnessed continued growth in loan and deposit balances and maintained a strong capital position.
Net operating income came in at $351 million, up 21% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $1.98 remained stable year over year. Net income increased 17% year over year to $336 million.
Revenue Rises Driven by Hudson City Acquisition
M&T Bank’s revenues came in at $1.31 billion, lagging the Zacks Consensus Estimate of $1.33 billion. However, it compared favorably with the year-ago figure of $1.18 billion.
Taxable-equivalent net interest income increased 26% year over year to $870 million in the quarter, driven by increased average earning assets that benefited from the Hudson City Bancorp acquisition. However, net interest margin declined to 3.13% from 3.17% in the prior-year quarter.
Other income declined 10% year over year to $448 million. The decrease was driven by a fall in several fee income categories including mortgage banking revenues, service charges on deposit accounts and other revenues.
However, these declines were partially offset by an increase in trust income and higher trading account and foreign exchange gains.
Non-interest expenses were $750 million, up 8% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $726 million, increasing 5% from the prior-year quarter. Non-interest operating expenses in the reported quarter reflected increase in several cost heads including salaries and employee benefits and net occupancy expense, and FDIC assessments.
Efficiency ratio for the quarter declined to 55.06% from 58.23% in the prior-year quarter. A fall in the efficiency ratio indicates improvement in profitability.
Loans and leases, net of unearned discount, increased 30% year over year to $88.52 billion at the end of the quarter. Moreover, total deposits rose 30% year over year to $94.65 billion.
M&T Bank's net operating income reflected an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.18% and 12.68%, respectively, compared with 1.24% and 13.76% recorded in the prior-year quarter.
Mixed Credit Quality
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses increased 7% year over year to $32 million. Net charge-offs of loans came in at $24 million, up 14% year over year. Further, non-performing assets increased 19% year over year to $1.02 billion.
However, net charge-offs as a percentage of average loans outstanding were 0.11%, down from 0.13% in the year-ago quarter. Also, the ratio of non-accrual loans to total net loans was 0.96%, down from 1.17% in the prior-year quarter.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 11.01%. Tangible equity per share came in at $66.95, up 13% year over year.
Share Repurchase
During the second quarter M&T Bank repurchased 1.3 million shares of common stock for a total cost of $154 million.
Our Viewpoint
Though M&T Bank failed to deliver a positive earnings surprise, results reflect a decent performance in the quarter. We believe the company, with its solid business model and strategic acquisitions, is well poised for growth. The deal with Hudson City has in all probability provided an upside to M&T Bank’s top line by leveraging the former’s retail network as well as product and balance sheet diversification.
However, regulatory issues and margin pressure amid a low interest rate environment remain headwinds for M&T Bank.
M&T Bank currently carries a Zacks Rank #3 (Hold).
Performance of Other Large Wall Street Firms
Among major banks, JPMorgan Chase & Co. (JPM - Free Report) kick-started the second-quarter earnings season on a positive note. Driven by improved trading revenues, the company reported earnings of $1.55 per share that handily outpaced the Zacks Consensus Estimate of $1.43. Also, the figure reflects a 1% rise from the year-ago period. Notably, the results included a legal benefit of $430 million.
Citigroup Inc. (C - Free Report) came out with second-quarter 2016 earnings from continuing operations per share of $1.25, handily beating the Zacks Consensus Estimate of $1.09. Results were primarily aided by lower expenses, partially offset by reduced revenues.
Higher provisions and decline in revenues led Bank of America Corporation’s (BAC - Free Report) second-quarter 2016 earnings of 36 cents per share to go down 16% over the prior year. However, the earnings surpassed the Zacks Consensus Estimate of 34 cents. Results reflected improved fixed income trading revenues and efficient cost control.
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M&T Bank (MTB) Q2 Earnings Up on Higher Interest Income
M&T Bank Corporation’s (MTB - Free Report) net operating earnings of $2.07 per share for second-quarter 2016 improved 3% year over year on higher net interest income. However, the reported figure missed the Zacks Consensus Estimate by a penny.
Higher expenses and a rise in provision for loan losses were primarily responsible for the earnings miss. Nevertheless, revenues improved driven by growth in net interest income that benefited from the Hudson City Bancorp acquisition. Also, the quarter witnessed continued growth in loan and deposit balances and maintained a strong capital position.
Net operating income came in at $351 million, up 21% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $1.98 remained stable year over year. Net income increased 17% year over year to $336 million.
Revenue Rises Driven by Hudson City Acquisition
M&T Bank’s revenues came in at $1.31 billion, lagging the Zacks Consensus Estimate of $1.33 billion. However, it compared favorably with the year-ago figure of $1.18 billion.
Taxable-equivalent net interest income increased 26% year over year to $870 million in the quarter, driven by increased average earning assets that benefited from the Hudson City Bancorp acquisition. However, net interest margin declined to 3.13% from 3.17% in the prior-year quarter.
Other income declined 10% year over year to $448 million. The decrease
was driven by a fall in several fee income categories including mortgage banking revenues, service charges on deposit accounts and other revenues.
However, these declines were partially offset by an increase in trust income and higher trading account and foreign exchange gains.
Non-interest expenses were $750 million, up 8% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $726 million, increasing 5% from the prior-year quarter. Non-interest operating expenses in the reported quarter reflected increase in several cost heads including salaries and employee benefits and net occupancy expense, and FDIC assessments.
Efficiency ratio for the quarter declined to 55.06% from 58.23% in the prior-year quarter. A fall in the efficiency ratio indicates improvement in profitability.
Loans and leases, net of unearned discount, increased 30% year over year to $88.52 billion at the end of the quarter. Moreover, total deposits rose 30% year over year to $94.65 billion.
M&T Bank's net operating income reflected an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.18% and 12.68%, respectively, compared with 1.24% and 13.76% recorded in the prior-year quarter.
Mixed Credit Quality
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses increased 7% year over year to $32 million. Net charge-offs of loans came in at $24 million, up 14% year over year. Further, non-performing assets increased 19% year over year to $1.02 billion.
However, net charge-offs as a percentage of average loans outstanding were 0.11%, down from 0.13% in the year-ago quarter. Also, the ratio of non-accrual loans to total net loans was 0.96%, down from 1.17% in the prior-year quarter.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 11.01%. Tangible equity per share came in at $66.95, up 13% year over year.
Share Repurchase
During the second quarter M&T Bank repurchased 1.3 million shares of common stock for a total cost of $154 million.
Our Viewpoint
Though M&T Bank failed to deliver a positive earnings surprise, results reflect a decent performance in the quarter. We believe the company, with its solid business model and strategic acquisitions, is well poised for growth. The deal with Hudson City has in all probability provided an upside to M&T Bank’s top line by leveraging the former’s retail network as well as product and balance sheet diversification.
However, regulatory issues and margin pressure amid a low interest rate environment remain headwinds for M&T Bank.
M&T BANK CORP Price, Consensus and EPS Surprise
M&T BANK CORP Price, Consensus and EPS Surprise | M&T BANK CORP Quote
M&T Bank currently carries a Zacks Rank #3 (Hold).
Performance of Other Large Wall Street Firms
Among major banks, JPMorgan Chase & Co. (JPM - Free Report) kick-started the second-quarter earnings season on a positive note. Driven by improved trading revenues, the company reported earnings of $1.55 per share that handily outpaced the Zacks Consensus Estimate of $1.43. Also, the figure reflects a 1% rise from the year-ago period. Notably, the results included a legal benefit of $430 million.
Citigroup Inc. (C - Free Report) came out with second-quarter 2016 earnings from continuing operations per share of $1.25, handily beating the Zacks Consensus Estimate of $1.09. Results were primarily aided by lower expenses, partially offset by reduced revenues.
Higher provisions and decline in revenues led Bank of America Corporation’s (BAC - Free Report) second-quarter 2016 earnings of 36 cents per share to go down 16% over the prior year. However, the earnings surpassed the Zacks Consensus Estimate of 34 cents. Results reflected improved fixed income trading revenues and efficient cost control.
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 >>