M&T Bank Corporation
(MTB - Free Report
) has delivered positive earnings surprises in three of the last four quarters; most recently beating by nearly 17.9% in the third quarter. This Zacks #1 Rank (Strong Buy) commercial bank hit its 52-week high on October 18, a day after its results were announced. The company pays a regular quarterly dividend that yields a decent 2.7% and the stock has gained 37.6% since the beginning of this year.
Impressive Third Quarter Earnings
On October 17, M&T Bank Corporation reported third quarter earnings per share of $2.17, topping the Zacks Consensus Estimate of $1.84 by 17.9% and the year-ago earnings of $1.32 by 64.0%. The improvement was primarily due to revenue growth, prudent expense management and a lower provision for credit losses.
Net interest income climbed 7.5% year over year to $663 million, driven by an increase in average earning assets and a widening of the net interest margin. The net interest margin expanded nine basis points on a year-over-year basis to 3.77%. Non-interest income rose 21.0% to $446 million over the same period. The company's non-interest expenses decreased 7.0% year over year to $616 million.
Credit quality reflected an improvement at M&T Bank Corporation. Provision for credit losses waned 21.0% year over year to $46 million and net charge-offs dipped 26.3% to $42 million. Net charge-offs, as a percentage of average loans outstanding, were 0.26%, down from 0.39% in the prior-year quarter.
Earnings Estimate Revisions Moving Higher
The Zacks Consensus Estimate for 2012 is up 7.9% to $7.48 in the past 30 days as 19 of 20 total estimates moved higher. The Zacks Consensus Estimate for 2013 advanced 6.5% to $8.21 on upward revisions from 17 of 20 estimates.
The Zacks Consensus Estimate for 2012 reflects year-over-year growth of about 15.4%, while the expected growth rate for 2013 is 9.8%.
M&T Bank Corporation is one of the few banks that maintained its dividend payment throughout the financial crisis. Currently, the company pays a quarterly dividend of 70 cents per share, affirming an annual yield of 2.7%.
Valuation Looks Reasonable
Shares of M&T Bank Corporation currently trade at 14.0x 12-month forward earnings, a 20.0% premium to the peer group average of 11.7x. Its price to book ratio of 1.5 is at a 36% premium to the industry median of 1.1. The company has a trailing 12-month ROE of 10.4% compared with the peer group average of 9.8%.
Chart Shows Strength
M&T Bank Corporation has witnessed sturdy price momentum since August 2012. Moreover, the company has been continuously outperforming its 200-day and 50-day moving averages over the last three months, exhibiting a steady growth trend. The year-to-date return for the stock came in at 37.6% compared with the S&P 500s return of 13.6%.
With rising estimates, strong growth projections, a reasonable valuation and a decent dividend yield, M&T Bank Corporation looks like a promising pick for investors seeking both growth and income.
Headquartered in Buffalo, New York, M&T Bank Corporation, operating as the holding company for M&T Bank, provides various banking products and services. The company was founded in 1856 and conducts business through 780 retail and commercial branches and 2,000 ATMs located in 8 states, the District of Columbia, and Ontario, Canada. With a market cap of about $13.3 billion, M&T Bank Corporation competes with SunTrust Banks, Inc. (STI), among others.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.