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M&T Bank (MTB) Ratings Affirmed by Moody's, Outlook Stable
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M&T Bank Corporation (MTB - Free Report) and its subsidiaries’ long-term debt and deposit ratings, and assessments have been affirmed by Moody’s Investors Service. Baseline credit assessment (BCA) of the company’s lead bank subsidiary — Manufacturers and Traders Trust Company — has been reiterated as a2. Also, the outlook has been left unchanged at stable.
Per the rating agency, M&T Bank’s ratings reflect strong credit quality backed by consistent and conservative underwriting, which partially offsets the risk of high exposure to commercial real estate (CRE) lending. Also, the company’s ability to keep net-charge offs at lower level, even during tough economic conditions, is commendable.
Despite the pandemic-related mayhem, M&T Bank was successful in keeping net charge-offs and problem loans low in 2020. Per Moody’s, the company’s strong pre-provision profitability also provides the ability to absorb additional provision expenses.
M&T Bank’s ability to consistently grow earnings is encouraging. Its diversified regional consumer and commercial banking businesses aid earnings, as it delivers a high net interest margin that supports top line, decent fee income and a strong operating efficiency.
The affirmation of M&T's standalone bank-level BCA and ratings reflects the bank's strong asset quality and profitability record and robust deposit funding, partly offset by its weaker capitalization relative to peers.
Notably, M&T Bank's strong liquidity profile is a major factor for ratings affirmation. Moody's expects some of the company’s deposit and liquid asset growth, experienced in 2020, to reverse when excess market liquidity diminishes. Despite this, M&T is expected to maintain a strong core funded liquidity profile.
The stable outlook reflects Moody's view that capitalization, profitability and liquidity metrics will remain decent over the near term, though some deterioration of asset quality metrics is expected.
When can the Ratings be Upgraded?
M&T's standalone bank-level BCA might be upgraded if the bank is able to reduce its large CRE exposure or increase capitalization. A higher BCA would likely lead to a rating upgrade.
What Could Result in Downward Rating Pressure?
Downgrade of M&T's standalone bank-level BCA could occur if its capitalization, as measured by Moody's TCE ratio, falls below 9%, or if Moody's perceives that asset quality performance has weakened relative to peers. A sustained increase in market funding or decline in liquid assets would also be negative for BCA. A lower BCA would likely lead to a rating downgrade.
Shares of the company have gained 28.9% over the past six months compared with 28.9% growth recorded by the industry.
Over the past few months, Moody’s affirmed the ratings for many finance companies. Some of them are Washington Federal (WAFD - Free Report) , Fifth Third Bancorp (FITB - Free Report) and KeyCorp (KEY - Free Report) . Outlook for all the three banks was affirmed at stable.
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M&T Bank (MTB) Ratings Affirmed by Moody's, Outlook Stable
M&T Bank Corporation (MTB - Free Report) and its subsidiaries’ long-term debt and deposit ratings, and assessments have been affirmed by Moody’s Investors Service. Baseline credit assessment (BCA) of the company’s lead bank subsidiary — Manufacturers and Traders Trust Company — has been reiterated as a2. Also, the outlook has been left unchanged at stable.
Per the rating agency, M&T Bank’s ratings reflect strong credit quality backed by consistent and conservative underwriting, which partially offsets the risk of high exposure to commercial real estate (CRE) lending. Also, the company’s ability to keep net-charge offs at lower level, even during tough economic conditions, is commendable.
Despite the pandemic-related mayhem, M&T Bank was successful in keeping net charge-offs and problem loans low in 2020. Per Moody’s, the company’s strong pre-provision profitability also provides the ability to absorb additional provision expenses.
M&T Bank’s ability to consistently grow earnings is encouraging. Its diversified regional consumer and commercial banking businesses aid earnings, as it delivers a high net interest margin that supports top line, decent fee income and a strong operating efficiency.
The affirmation of M&T's standalone bank-level BCA and ratings reflects the bank's strong asset quality and profitability record and robust deposit funding, partly offset by its weaker capitalization relative to peers.
Notably, M&T Bank's strong liquidity profile is a major factor for ratings affirmation. Moody's expects some of the company’s deposit and liquid asset growth, experienced in 2020, to reverse when excess market liquidity diminishes. Despite this, M&T is expected to maintain a strong core funded liquidity profile.
The stable outlook reflects Moody's view that capitalization, profitability and liquidity metrics will remain decent over the near term, though some deterioration of asset quality metrics is expected.
When can the Ratings be Upgraded?
M&T's standalone bank-level BCA might be upgraded if the bank is able to reduce its large CRE exposure or increase capitalization. A higher BCA would likely lead to a rating upgrade.
What Could Result in Downward Rating Pressure?
Downgrade of M&T's standalone bank-level BCA could occur if its capitalization, as measured by Moody's TCE ratio, falls below 9%, or if Moody's perceives that asset quality performance has weakened relative to peers. A sustained increase in market funding or decline in liquid assets would also be negative for BCA. A lower BCA would likely lead to a rating downgrade.
Shares of the company have gained 28.9% over the past six months compared with 28.9% growth recorded by the industry.
Currently, M&T Bank carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rating Actions by Moody’s on Other Banks
Over the past few months, Moody’s affirmed the ratings for many finance companies. Some of them are Washington Federal (WAFD - Free Report) , Fifth Third Bancorp (FITB - Free Report) and KeyCorp (KEY - Free Report) . Outlook for all the three banks was affirmed at stable.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
AccessZacks Top 10 Stocks for 2021 today >>