A month has gone by since the last earnings report for M&T Bank Corporation (MTB Quick QuoteMTB - Free Report) . Shares have added about 13% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is M&T Bank Corporation 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 catalysts.

M&T Bank Q2 Earnings Meet Estimates, NII Rises on Loans

M&T Bank reported net operating earnings per share of $3.10 for second-quarter 2022, meeting the Zacks Consensus Estimate. However, the bottom line compares unfavorably with the $3.45 per share reported in the year-ago period.

A rise in NII on net interest margin expansion and balance sheet strength drove M&T Bank’s results. Yet a rise in expenses was a key undermining factor.

Net income available to common shareholders in the reported quarter was around $192 million, down 56% from the prior year.

Revenues Jump on NII Rise, Expenses Flare Up

M&T Bank’s quarterly revenues totaled $1.98 billion, missing the consensus mark of $2.03 billion. Nonetheless, the reported figure increased 35.6% year over year.

NII on a taxable-equivalent basis increased 50% year over year to $1.4 billion in the second quarter. This was due to a higher net interest margin and the impact of earning assets from the People's United acquisition. The net interest margin expanded 36 bps to 3.01%.

The company’s non-interest income was $571 million, up 11% year over year. A rise in service charges on deposit accounts, trust income and brokerage services’ income resulted in the upside.

Non-interest expenses totaled $1.4 billion, flaring up 64% from the prior-year period. The upsurge mainly stemmed from the impact of the acquisition of People's United, higher salaries and employee benefits, outside data processing and software expenses, and FDIC assessment costs.

The efficiency ratio was 58.3%, up from 58.4% in the year-earlier quarter. A lower ratio indicates a rise in profitability.

Loans and leases, net of unearned discount, were $128.5 billion at the end of the reported quarter, up 40% from the prior quarter. Also, total deposits rose 35% to $170.4 billion.

Credit Quality Deteriorates

For M&T Bank, credit metrics declined in the second quarter. Net charge-offs increased 8% on a year-over-year basis to $50 million. Non-performing assets rose 17% to $2.66 billion. The company recorded a provision for credit losses of $302 million against a recapture of $15 million in the year-ago quarter.

Nonetheless, the ratio of non-accrual loans to total net loans was 2.05%, down from 2.31% year over year.

Capital Position Strong, Profitability Falls

M&T Bank’s estimated Common Equity Tier 1 ratio was 11.9%, up from 10.7% as of Jun 30, 2020. Tangible equity per share was $85.78, up from $84.47 as of Jun 30, 2021.

M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity of 1.16% and 12.41% compared with 1.27% and 16.68%, respectively, recorded in the prior-year quarter.

Capital Deployment Update

The company repurchased 3.5 million shares of its common stock in the second quarter for $600 million.

2022 Outlook

All assumptions are made on a combined basis.

Management expects average loans to grow in the lower end of 24-26% compared to standalone full-year 2021. Investment securities are expected to grow by $2 billion per quarter.

Deposits are expected to decline 1-2% from the second-quarter level likely due to pressure on non-interest-bearing deposits.

NI is expected to grow 56%. Depending on the rate hikes speed by the Fed, the reactivity of deposit pricing, the pace of the deployment of excess liquidity and loan growth, NII is expected to be 54-56%.

Management expects non-interest revenues to grow 5-7%. This is likely to be driven by strong trust income growth, backed by new business and recapture of money market fee waivers. However, higher interest rates might continue to affect mortgage originations and gain on sale margins. Also, as the company plans to retain almost all mortgage originations for the rest of the ongoing year, minimal gain on sale income for the second half of 2022 is expected.

Operating expense growth is estimated to be 24-26% (excluding pre-tax merger-related charges).

Management expects the net charge-off ratio to be 20 bps.

The CET1 ratio is anticipated to be 10.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, M&T Bank Corporation has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

M&T Bank Corporation has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

M&T Bank Corporation is part of the Zacks Banks - Major Regional industry. Over the past month, Wells Fargo (WFC Quick QuoteWFC - Free Report) , a stock from the same industry, has gained 6.6%. The company reported its results for the quarter ended June 2022 more than a month ago.

Wells Fargo reported revenues of $17.03 billion in the last reported quarter, representing a year-over-year change of -16%. EPS of $0.74 for the same period compares with $1.38 a year ago.

Wells Fargo is expected to post earnings of $1.11 per share for the current quarter, representing a year-over-year change of -5.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Wells Fargo. Also, the stock has a VGM Score of D.