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M&T Bank (MTB) Q3 Earnings Beat Estimates, Revenues Down
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M&T Bank Corporation (MTB - Free Report) has reported third-quarter 2020 earnings surprise of 5.3% on controlled expenses. Net operating earnings per share of $2.77 beat the Zacks Consensus Estimate of $2.63. The bottom line, however, compares unfavorably with the $3.50 per share reported in the year-ago quarter.
The company’s results were driven by prudent expense management. Moreover, rise in loan and deposit balances highlights a strong capital position. Nevertheless, revenues disappointed on lower rates and decline in fee income. Further, rise in provisions was an undermining factor.
Net income (on GAAP basis) for the quarter was $372 million or $2.75 per share compared with the $480 million or $3.47 per share recorded a year ago.
Revenues Decline Y/Y, Loans Rise, Expenses Down
M&T Bank’s revenues were $1.47 billion, down 5.8% from the year-ago quarter. However, the revenue figure surpassed the consensus estimate of $1.46 billion.
Taxable-equivalent net interest income declined 9% year over year to $947 million in the quarter. This fall stemmed from lower net interest margin, partially offset by higher average earning assets (up 18%). Net interest margin contracted 83 basis points (bps) to 2.95%.
The company’s non-interest income was $521 million, down 1% year over year. Lower service charges on deposit accounts, brokerage services income, trading account and foreign exchange gains, along with reduced gain on bank investment securities, primarily resulted in this decline. These were mostly offset by higher trust income, mortgage banking revenues and other income.
Non-interest expenses totaled $827 million, down 6% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses were $823 million, down 5.7% year on year. This decline mainly stemmed from lower advertising and marketing costs, reduced amortization of core deposit and other intangible assets, along with other costs.
Efficiency ratio was 56.2%, up from the 56% recorded in the prior-year quarter. A higher ratio indicates a fall in profitability.
Loans and leases, net of unearned discount, were $98.4 billion at the end of the reported quarter, marginally up from the prior quarter. Also, total deposits rose slightly to $115.2 billion.
M&T Bank's net operating income displays an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.10% and 13.94%, respectively, compared with the 1.66% and 18.85% recorded in the prior-year quarter.
Credit Quality: A Mixed Bag
For M&T Bank, credit metrics were a mixed bag during the July-September quarter. Provision for credit losses rose significantly on a year-over-year basis to $150 million. Net charge-offs of loans were $30 million, down 18%.
The ratio of non-accrual loans to total net loans was 1.26%, up 14 bps year over year. Non-performing assets increased 19% to $1.3 billion.
Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were 9.81%. Tangible equity per share was $79.85, up 6.6% year over year from $74.93 as of Sep 30, 2019.
Our Viewpoint
M&T Bank put up a decent performance during the September-end quarter. Lower rates and decline in fee income were headwinds. Nonetheless, expense management provided some respite. Apart from this, rise in loan and deposit balance continues to aid organic growth. Though we believe the company, with its sturdy business model and acquisitions, is well poised for growth, deterioration in credit quality is a major concern.
MT Bank Corporation Price, Consensus and EPS Surprise
Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2020 earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in 8.4% lower than the prior-year quarter’s level. Results primarily benefited from growth in asset balance. Nonetheless, slightly lower revenues and rise in expenses were undermining factors.
First Republic Bank delivered a positive earnings surprise of 16.7% in the third quarter on solid top-line strength. Earnings per share of $1.61 outpaced the Zacks Consensus Estimate of $1.38. Additionally, the bottom line climbed 22.9% from the year-ago quarter. Results were supported by an increase in NII and fee income. Yet, higher expenses and elevated provisions were offsetting factors.
Regions Financial (RF - Free Report) reported third-quarter 2020 adjusted earnings of 49 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, results compared favorably with the prior-year period earnings of 39 cents. Results were driven by higher revenues on increases in both NII and fee income. Furthermore, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Nevertheless, higher provisions for credit losses and rise in expenses were undermining factors.
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M&T Bank (MTB) Q3 Earnings Beat Estimates, Revenues Down
M&T Bank Corporation (MTB - Free Report) has reported third-quarter 2020 earnings surprise of 5.3% on controlled expenses. Net operating earnings per share of $2.77 beat the Zacks Consensus Estimate of $2.63. The bottom line, however, compares unfavorably with the $3.50 per share reported in the year-ago quarter.
The company’s results were driven by prudent expense management. Moreover, rise in loan and deposit balances highlights a strong capital position. Nevertheless, revenues disappointed on lower rates and decline in fee income. Further, rise in provisions was an undermining factor.
Net income (on GAAP basis) for the quarter was $372 million or $2.75 per share compared with the $480 million or $3.47 per share recorded a year ago.
Revenues Decline Y/Y, Loans Rise, Expenses Down
M&T Bank’s revenues were $1.47 billion, down 5.8% from the year-ago quarter. However, the revenue figure surpassed the consensus estimate of $1.46 billion.
Taxable-equivalent net interest income declined 9% year over year to $947 million in the quarter. This fall stemmed from lower net interest margin, partially offset by higher average earning assets (up 18%). Net interest margin contracted 83 basis points (bps) to 2.95%.
The company’s non-interest income was $521 million, down 1% year over year. Lower service charges on deposit accounts, brokerage services income, trading account and foreign exchange gains, along with reduced gain on bank investment securities, primarily resulted in this decline. These were mostly offset by higher trust income, mortgage banking revenues and other income.
Non-interest expenses totaled $827 million, down 6% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses were $823 million, down 5.7% year on year. This decline mainly stemmed from lower advertising and marketing costs, reduced amortization of core deposit and other intangible assets, along with other costs.
Efficiency ratio was 56.2%, up from the 56% recorded in the prior-year quarter. A higher ratio indicates a fall in profitability.
Loans and leases, net of unearned discount, were $98.4 billion at the end of the reported quarter, marginally up from the prior quarter. Also, total deposits rose slightly to $115.2 billion.
M&T Bank's net operating income displays an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.10% and 13.94%, respectively, compared with the 1.66% and 18.85% recorded in the prior-year quarter.
Credit Quality: A Mixed Bag
For M&T Bank, credit metrics were a mixed bag during the July-September quarter. Provision for credit losses rose significantly on a year-over-year basis to $150 million. Net charge-offs of loans were $30 million, down 18%.
The ratio of non-accrual loans to total net loans was 1.26%, up 14 bps year over year. Non-performing assets increased 19% to $1.3 billion.
Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were 9.81%. Tangible equity per share was $79.85, up 6.6% year over year from $74.93 as of Sep 30, 2019.
Our Viewpoint
M&T Bank put up a decent performance during the September-end quarter. Lower rates and decline in fee income were headwinds. Nonetheless, expense management provided some respite. Apart from this, rise in loan and deposit balance continues to aid organic growth. Though we believe the company, with its sturdy business model and acquisitions, is well poised for growth, deterioration in credit quality is a major concern.
MT Bank Corporation Price, Consensus and EPS Surprise
MT Bank Corporation price-consensus-eps-surprise-chart | MT 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 Banks
Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2020 earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in 8.4% lower than the prior-year quarter’s level. Results primarily benefited from growth in asset balance. Nonetheless, slightly lower revenues and rise in expenses were undermining factors.
First Republic Bank delivered a positive earnings surprise of 16.7% in the third quarter on solid top-line strength. Earnings per share of $1.61 outpaced the Zacks Consensus Estimate of $1.38. Additionally, the bottom line climbed 22.9% from the year-ago quarter. Results were supported by an increase in NII and fee income. Yet, higher expenses and elevated provisions were offsetting factors.
Regions Financial (RF - Free Report) reported third-quarter 2020 adjusted earnings of 49 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, results compared favorably with the prior-year period earnings of 39 cents. Results were driven by higher revenues on increases in both NII and fee income. Furthermore, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Nevertheless, higher provisions for credit losses and rise in expenses were undermining factors.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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