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Why Is M&T Bank (MTB) Up 8% Since the Last Earnings Report?
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A month has gone by since the last earnings report for M&T Bank Corporation (MTB - Free Report) . Shares have added about 8% in that time frame,outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
M&T Bank Disappoints on Q4 Earnings; Revenues Up
M&T Bank’s net operating earnings of $2.01 per share for fourth-quarter 2016 lagged the Zacks Consensus Estimate $2.03. Also, the bottom line declined 3.8% year over year.
Results were impacted by higher provisions. However, top-line growth and lower expenses were recorded. Further, the company witnessed continued growth in loan and deposit balances and maintained a solid capital position.
Net operating income came in at $336 million, down around 1% year over year.
For the year ended 2016, operating earnings per share were $8.08, up 4% compared with the prior-year figure of $7.74. Results also outshined the Zacks Consensus Estimate by $0.24.
On a GAAP basis, M&T Bank’s earnings per share of $1.98 also improved 20% year over year. Net income climbed 22% year over year to $331 million.
For 2016, GAAP net income was $1.32 billion or $7.78 per share, up from $1.08 billion or $7.18 per share reported in the prior year.
NII & Fee Income Growth Boost Revenues, Expenses Fall
Revenues for 2016 were $5.3 billion, marking a year-over-year increase of 12.8%. Results were in line with the Zacks Consensus Estimate.
M&T Bank’s revenues came in at $1.34 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.32 billion. In addition, it compared favorably with the year-ago figure of $1.26 billion.
Taxable-equivalent net interest income increased 9% year over year to $883 million in the quarter, driven by increased average earning assets. However, net interest margin contracted 4 basis points year over year to 3.08%.
Supported by strong growth in mortgage banking revenues and rise in trust income, the company’s other income climbed 14% year over year to $465 million.
Non-interest expenses were $769 million, down 2% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $760 million, improving 8.4% from the year-ago quarter. The rise reflected contribution to The M&T Charitable Foundation and higher FDIC assessments.
Efficiency ratio deteriorated to 56.4% in quarter from 55.5% in the prior-year quarter. A lrise in ratio indicates lower profitability.
Loans and leases, net of unearned discount, increased 4% year over year to $90.9 billion at the end of the quarter. Moreover, total deposits rose 4% year over year to $95.5 billion.
M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.10% and 11.93%, respectively, compared with 1.21% and 13.26% recorded in the prior-year quarter.
Credit Quality Deteriorated
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses increased 6.9% year over year to $62 million. Net charge-offs of loans came in at $49 million, up 37% year over year. Further, non-performing assets increased 7% year over year to $1.06 billion.
Further, the ratio of non-accrual loans to total net loans was 1.01%, up from 0.91% in the prior-year quarter. Additionally, allowance for credit losses to total loans was 1.09%, in line with the year-ago quarter.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.96%. Tangible equity per share came in at $67.85, up 6% year over year.
Share Repurchase
During 2016, M&T Bank repurchased a total of 5.61 million shares of its common stock at an average cost per share of $114.37 for a total cost of $641 million. Notably, during the fourth quarter, the company repurchased 0.3 million shares of common stock for a total cost of $37 million at an average cost per share of $124.45.
Outlook
For 2017, given the increase in interest rates, net loan growth is expected in the mid-single-digit range, driven by slower growth in commercial and consumer loans along with a slower pace of runoff in residential mortgage loans.
Management expects that even in the absence of further rate hikes in 2017, the December rate hike should lead to some expansion offsetting core margin pressures. Notably, a further rate hike in 2017 by the Fed will positively drive NIM.
However, the NIM outlook excludes the potential impact from cash balances brought in through Wilmington Trust. Moreover, management expects year-over-year growth in net interest income.
The rise in interest rates is expected to impact mortgage banking in 2017, specifically related to residential mortgage loan originations.
Management anticipates other fee businesses to remain stable with the growth in low- to mid-single-digit range. Further, low nominal growth in total operating expenses is expected.
Management aims to generate positive operating leverage in 2017.
In first-quarter 2017, seasonal increase in salaries and benefits is expected, reflecting annual equity incentive compensation along with other expenses.
Some modest pressure on nonperforming and criticized loans is expected, while credit losses are anticipated to remain relatively stable. Net charge-offs are also expected to remain low in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.
At this time, M&T Bank's stock has an average Growth Score of 'C', a grade with score of 'B' on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks 'style scores indicate that the company's stock is suitable for growth and momentum investors.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Why Is M&T Bank (MTB) Up 8% Since the Last Earnings Report?
A month has gone by since the last earnings report for M&T Bank Corporation (MTB - Free Report) . Shares have added about 8% in that time frame,outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
M&T Bank Disappoints on Q4 Earnings; Revenues Up
M&T Bank’s net operating earnings of $2.01 per share for fourth-quarter 2016 lagged the Zacks Consensus Estimate $2.03. Also, the bottom line declined 3.8% year over year.
Results were impacted by higher provisions. However, top-line growth and lower expenses were recorded. Further, the company witnessed continued growth in loan and deposit balances and maintained a solid capital position.
Net operating income came in at $336 million, down around 1% year over year.
For the year ended 2016, operating earnings per share were $8.08, up 4% compared with the prior-year figure of $7.74. Results also outshined the Zacks Consensus Estimate by $0.24.
On a GAAP basis, M&T Bank’s earnings per share of $1.98 also improved 20% year over year. Net income climbed 22% year over year to $331 million.
For 2016, GAAP net income was $1.32 billion or $7.78 per share, up from $1.08 billion or $7.18 per share reported in the prior year.
NII & Fee Income Growth Boost Revenues, Expenses Fall
Revenues for 2016 were $5.3 billion, marking a year-over-year increase of 12.8%. Results were in line with the Zacks Consensus Estimate.
M&T Bank’s revenues came in at $1.34 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.32 billion. In addition, it compared favorably with the year-ago figure of $1.26 billion.
Taxable-equivalent net interest income increased 9% year over year to $883 million in the quarter, driven by increased average earning assets. However, net interest margin contracted 4 basis points year over year to 3.08%.
Supported by strong growth in mortgage banking revenues and rise in trust income, the company’s other income climbed 14% year over year to $465 million.
Non-interest expenses were $769 million, down 2% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $760 million, improving 8.4% from the year-ago quarter. The rise reflected contribution to The M&T Charitable Foundation and higher FDIC assessments.
Efficiency ratio deteriorated to 56.4% in quarter from 55.5% in the prior-year quarter. A lrise in ratio indicates lower profitability.
Loans and leases, net of unearned discount, increased 4% year over year to $90.9 billion at the end of the quarter. Moreover, total deposits rose 4% year over year to $95.5 billion.
M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.10% and 11.93%, respectively, compared with 1.21% and 13.26% recorded in the prior-year quarter.
Credit Quality Deteriorated
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses increased 6.9% year over year to $62 million. Net charge-offs of loans came in at $49 million, up 37% year over year. Further, non-performing assets increased 7% year over year to $1.06 billion.
Further, the ratio of non-accrual loans to total net loans was 1.01%, up from 0.91% in the prior-year quarter. Additionally, allowance for credit losses to total loans was 1.09%, in line with the year-ago quarter.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.96%. Tangible equity per share came in at $67.85, up 6% year over year.
Share Repurchase
During 2016, M&T Bank repurchased a total of 5.61 million shares of its common stock at an average cost per share of $114.37 for a total cost of $641 million. Notably, during the fourth quarter, the company repurchased 0.3 million shares of common stock for a total cost of $37 million at an average cost per share of $124.45.
Outlook
For 2017, given the increase in interest rates, net loan growth is expected in the mid-single-digit range, driven by slower growth in commercial and consumer loans along with a slower pace of runoff in residential mortgage loans.
Management expects that even in the absence of further rate hikes in 2017, the December rate hike should lead to some expansion offsetting core margin pressures. Notably, a further rate hike in 2017 by the Fed will positively drive NIM.
However, the NIM outlook excludes the potential impact from cash balances brought in through Wilmington Trust. Moreover, management expects year-over-year growth in net interest income.
The rise in interest rates is expected to impact mortgage banking in 2017, specifically related to residential mortgage loan originations.
Management anticipates other fee businesses to remain stable with the growth in low- to mid-single-digit range. Further, low nominal growth in total operating expenses is expected.
Management aims to generate positive operating leverage in 2017.
In first-quarter 2017, seasonal increase in salaries and benefits is expected, reflecting annual equity incentive compensation along with other expenses.
Some modest pressure on nonperforming and criticized loans is expected, while credit losses are anticipated to remain relatively stable. Net charge-offs are also expected to remain low in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.
M&T Bank Corporation Price and Consensus
M&T Bank Corporation Price and Consensus | M&T Bank Corporation Quote
VGM Scores
At this time, M&T Bank's stock has an average Growth Score of 'C', a grade with score of 'B' on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks 'style scores indicate that the company's stock is suitable for growth and momentum investors.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.