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M&T Bank (MTB) Q4 Earnings Beat Estimates on Higher Revenues

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M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $4.57 in fourth-quarter 2022, which surpassed the Zacks Consensus Estimate of $4.47. The bottom line compares favorably with $3.50 in the year-ago quarter.

Results benefited from solid loan demand and higher rates, which supported net interest income (NII) growth. Further, other income improved during the quarter. However, an increase in credit costs and higher expenses acted as headwinds.

The net income available to common shareholders was $739.1 million, soaring 70% from the prior-year quarter.

In 2022, net operating earnings of $14.42 per share beat the Zacks Consensus Estimate of $14.00 and jumped 2% year over year. Net income available to common shareholders was $18.91 billion, rising 6%.

Revenues Jump on Higher NII, Expenses Rise

M&T Bank’s quarterly revenues were $2.51 billion, outpacing the consensus estimate of $2.37 billion. Nonetheless, the reported figure jumped 67% year over year.

In 2022, revenues grew 36% to $8.18 billion. The top line surpassed the consensus estimate of $8.04 billion.

NII, on a taxable-equivalent basis, surged 96% year over year to $1.84 billion. The increase was mainly driven by a higher net interest margin and the impact of earning assets from the People's United acquisition. Net interest margin expanded 148 basis points (bps) to 4.06%.

Total other income was $681.5 million, up 18%. Higher trading account and non-hedging derivative gains, and other revenues from operations mainly drove the rise.

Total other expenses totaled $1.41 billion, flaring up 52%. The upsurge mainly stemmed from the impact of the acquisition of People's United. Excluding non-operating charges, the non-interest operating expenses were $1.35 billion.

The efficiency ratio was 53.3%, down from 59.7% in the year-earlier quarter. A lower ratio indicates a rise in profitability.

Loans and leases, net of unearned discount, were $131.6 billion as of Dec 31, 2022, rising 3% from the prior quarter. The total deposits declined marginally to $163.5 billion.

Credit Quality Deteriorates

The net charge-offs increased 31% on a year-over-year basis to $40 million. The non-performing assets rose 19% to $2.48 billion.

The company recorded a provision for credit losses of $90 million against a recapture of $15 million in the year-ago quarter.

Nonetheless, the ratio of non-accrual loans to total net loans was 1.85%, down 37 bps year over year.

Capital & Profitability Ratios Strong

M&T Bank’s estimated Common Equity Tier 1 ratio was 10.4%, down from 11.4% as of Dec 31, 2021. The tangible equity per share was $86.59, down from $89.80 as of Dec 31, 2021.

M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity were 1.70% and 21.29% compared with 1.23% and 15.98%, respectively, in the prior-year quarter.

Share Repurchase Update

The company repurchased 3.7 million shares of its common stock in the fourth quarter for $600 million.

Our View

M&T Bank put up a decent performance in the fourth quarter. Balance sheet and revenue growth was primarily driven by its acquisition of People's United. The solid loan balance will likely continue aiding organic growth in the days to come. However, worsening credit quality and elevated expenses were headwinds.

M&T Bank Corporation Price, Consensus and EPS Surprise

M&T Bank Corporation Price, Consensus and EPS Surprise

M&T Bank Corporation price-consensus-eps-surprise-chart | M&T 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 Major Banks

Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.

BK’s results were aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues hurt BK’s results to some extent.

The PNC Financial Services Group, Inc.’s (PNC - Free Report) fourth-quarter 2022 adjusted earnings per share of $3.49 lagged the Zacks Consensus Estimate of $3.95. Also, the bottom line declined 5.2% year over year.

PNC’s results were primarily hurt by a decline in non-interest income and higher provisions. However, an increase in net interest income, supported by higher rates and loan growth, and a decline in expenses were tailwinds.

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