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M&T Bank (MTB) Up 6.9% Since Earnings Report: Can It Continue?
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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 6.9% 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 its most recent earnings report in order to get a better handle on the important drivers.
M&T Bank Beats Q1 Earnings Estimates, Revenues Up
M&T Bank recorded a positive earnings surprise of 10.8% in first-quarter 2017. The company reported net operating earnings of $2.15 per share which surpassed the Zacks Consensus Estimate of $1.94. Also, the bottom line improved 15% year over year.
Better-than-expected performance resulted from top-line growth, aided by consistent growth in loan and deposit balances. Further, pressure on margin eased. However, results were affected by higher expenses and provisions.
Net operating income came in at $354 million, up 11% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $2.12 also jumped 23% year over year. Net income climbed 17% year over year to $349 million.
NII & Fee Income Growth Boost Revenues, Expenses Flare Up
M&T Bank’s revenues came in at $1.36 billion, outpacing the Zacks Consensus Estimate of $1.34 billion. In addition, it compared favorably with the year-ago figure of $1.29 billion.
Taxable-equivalent net interest income increased 5% year over year to $922 million in the quarter, driven by increased net interest margin. Furthermore, net interest margin expanded 16 basis points year over year to 3.34%.
Supported by strong growth in credit-related fees and rise in trust income, the company’s other income climbed 6% year over year to $447 million.
Non-interest expenses were $788 million, up 1.5% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $779 million, escalating 5.1% from the year-ago quarter. The rise reflected elevated salaries and employee benefits costs.
Efficiency ratio improved to 56.9% in this quarter from 57.0% in the prior-year quarter. Improvement in ratio indicates rise in profitability.
Loans and leases, net of unearned discount, inched up 1.6% year over year to $89.3 billion at the end of the quarter. Moreover, total deposits rose 3% year over year to $97.0 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 1.21% and 13.05%, respectively, compared with 1.09% and 11.62% 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 12.2% year over year to $55 million. Net charge-offs of loans came in at $43 million, up 2.4% year over year.
Further, the ratio of non-accrual loans to total net loans was 1.04%, up from 1.00% in the comparable period last year. Additionally, allowance for credit losses to total loans was 1.12%, up from 1.10% in the year-ago quarter. However, non-performing assets decreased 2% year over year to $1.05 billion.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.66%. Tangible equity per share came in at $67.16, up 2.3% year over year.
Share Repurchase
During first-quarter 2017, M&T Bank repurchased a total of 3.23 million shares of its common stock for a total cost of $532 million.
Outlook
For 2017, net loan growth is expected in the low-single-digit range, driven by sluggish growth in commercial and consumer loans.
Notably, management anticipates low single-digit to mid-single digit growth in C&I and CRE as well as the other consumer loan categories.
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 with the growth in low- to mid-single-digit range. Further, low nominal growth in total operating expenses is expected.
Management aims efficiency ratio to be at the low end of 55–57% in 2017.
Some modest pressure on non-performing and criticized loans is expected, while credit losses are anticipated to remain relatively stable. Net charge-offs are also predicted 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 five revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been eight moves up in the last two months.
At this time, M&T Bank's stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. 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 aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been 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 #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.
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M&T Bank (MTB) Up 6.9% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for M&T Bank Corporation (MTB - Free Report) . Shares have added about 6.9% 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 its most recent earnings report in order to get a better handle on the important drivers.
M&T Bank Beats Q1 Earnings Estimates, Revenues Up
M&T Bank recorded a positive earnings surprise of 10.8% in first-quarter 2017. The company reported net operating earnings of $2.15 per share which surpassed the Zacks Consensus Estimate of $1.94. Also, the bottom line improved 15% year over year.
Better-than-expected performance resulted from top-line growth, aided by consistent growth in loan and deposit balances. Further, pressure on margin eased. However, results were affected by higher expenses and provisions.
Net operating income came in at $354 million, up 11% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $2.12 also jumped 23% year over year. Net income climbed 17% year over year to $349 million.
NII & Fee Income Growth Boost Revenues, Expenses Flare Up
M&T Bank’s revenues came in at $1.36 billion, outpacing the Zacks Consensus Estimate of $1.34 billion. In addition, it compared favorably with the year-ago figure of $1.29 billion.
Taxable-equivalent net interest income increased 5% year over year to $922 million in the quarter, driven by increased net interest margin. Furthermore, net interest margin expanded 16 basis points year over year to 3.34%.
Supported by strong growth in credit-related fees and rise in trust income, the company’s other income climbed 6% year over year to $447 million.
Non-interest expenses were $788 million, up 1.5% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $779 million, escalating 5.1% from the year-ago quarter. The rise reflected elevated salaries and employee benefits costs.
Efficiency ratio improved to 56.9% in this quarter from 57.0% in the prior-year quarter. Improvement in ratio indicates rise in profitability.
Loans and leases, net of unearned discount, inched up 1.6% year over year to $89.3 billion at the end of the quarter. Moreover, total deposits rose 3% year over year to $97.0 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 1.21% and 13.05%, respectively, compared with 1.09% and 11.62% 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 12.2% year over year to $55 million. Net charge-offs of loans came in at $43 million, up 2.4% year over year.
Further, the ratio of non-accrual loans to total net loans was 1.04%, up from 1.00% in the comparable period last year. Additionally, allowance for credit losses to total loans was 1.12%, up from 1.10% in the year-ago quarter. However, non-performing assets decreased 2% year over year to $1.05 billion.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.66%. Tangible equity per share came in at $67.16, up 2.3% year over year.
Share Repurchase
During first-quarter 2017, M&T Bank repurchased a total of 3.23 million shares of its common stock for a total cost of $532 million.
Outlook
For 2017, net loan growth is expected in the low-single-digit range, driven by sluggish growth in commercial and consumer loans.
Notably, management anticipates low single-digit to mid-single digit growth in C&I and CRE as well as the other consumer loan categories.
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 with the growth in low- to mid-single-digit range. Further, low nominal growth in total operating expenses is expected.
Management aims efficiency ratio to be at the low end of 55–57% in 2017.
Some modest pressure on non-performing and criticized loans is expected, while credit losses are anticipated to remain relatively stable. Net charge-offs are also predicted 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 five revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been eight moves up in the last two months.
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 a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. 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 aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been 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 #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.