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NII to Support M&T Bank's (MTB) Q1 Earnings, Expenses to Hurt
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M&T Bank Corporation (MTB - Free Report) is scheduled to report first-quarter 2023 results on Apr 17, before the opening bell. The bank’s earnings and revenues are expected to have increased from the year-ago reported figure.
In the prior quarter, M&T Bank surpassed the Zacks Consensus Estimate on a rise in net interest income (NII), supported by solid loan demand and higher rates. However, an increase in credit costs and higher expenses acted as headwinds.
M&T Bank has a decent earnings surprise history, having surpassed estimates in two of the last four quarters, missed once and matched in the other. The company has a trailing four-quarter earnings surprise of 3.50%, on average.
NII: There was a considerable decline in commercial lending, as the lending environment weakened sequentially in the quarter. Given M&T Bank’s substantial exposure to commercial and commercial real estate loans, the company is likely to have been affected. However, commercial real estate loans, residential real estate loans and consumer loans improved modestly in January and February per the Fed’s latest data.
Management expected to witness growth in commercial and industrial loans in the quarter on the back of solid loan strength. Its average loan balances increased to $131.5 billion as of Feb 28, from $129.4 billion as of Dec 31, 2022. Also, MTB increased investments in securities to $2.5 billion (as of Feb 28), which is likely to have increased its average interest earning assets.
The Zacks Consensus Estimate for first-quarter average interest-earning assets of $179.9 billion suggests a marginal rise from the prior quarter’s reported number. We estimate the metric to be $170.2 billion.
The Federal Reserve raised rates by 50 basis points in the quarter and 25 bps in the prior quarter. The policy rate reached 4.75-5%, the highest since 2008. Hence, decent loan growth and higher rates are likely to have a positive impact on the NII, partially offset by the higher deposit costs as the deposit mix has been shifting to higher cost products throughout the quarter.
The Zacks Consensus Estimate for first-quarter NII of $1.8 billion suggests a 1.42% decrease from the prior-quarter’s reported number. We estimate for the metric matches the Zacks Consensus Estimate.
Fee Income: M&T Bank is anticipated to have witnessed a decline in trust revenues on a disappointing equity market performance in the to-be-reported quarter. The Zacks Consensus Estimate of $195 is in line with the prior-quarter’s reported number. We estimate the trust income to be $201 million for the quarter.
The company removed non-sufficient fund fees and overdraft protection transfer charges from linked-deposit accounts, as well as reduced overdraft fees to $15 in second-quarter 2022. This is likely to have an adverse impact on revenues from service charges on deposits in the to-be-reported quarter compared with the prior-year quarter.
The purchase mortgage originations are expected to have continued to decline in the first quarter, whereas refinancing originations are anticipated to have been stable. Also, in the first quarter, mortgage rates remained almost stable, with the rate on the 30-year fixed mortgage reaching 6.32% in March. The rates have jumped from around 3% in the prior-year quarter.
The climb in mortgage rates has taken a toll on the origination market. These factors are expected to have lowered MTB’s mortgage banking revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for total other income of $569 million suggests a slip of 16.57% from the prior-quarter’s reported level. We estimate the metric to be $607 million.
Expenses: The company’s expense base is expected to have been under pressure amid seasonally higher compensation expenses of $100-$105 million in the first quarter of 2023. Also, due to M&T Bank’s acquisition of People’s United in second-quarter 2022, expenses in the quarter under review are likely to be elevated than that reported in the prior-year quarter.
Managements’ expectation of increasing expenses sequentially in the quarter is likely to limit operational efficiency and bottom-line growth. We estimate the metric to be $1.4 billion.
Here is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict an earnings beat for M&T Bank this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is -2.99%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Estimate Trend
Prior to the first-quarter earnings release, the company is witnessing downward estimate revisions, reflecting the bearish sentiment of analysts. The Zacks Consensus Estimate for first-quarter earnings has been revised 1.7% south to $4.03 in the past week. Nonetheless, the figure suggests a year-over-year rise of 47.62%.
The consensus estimate for revenues of $2.37 billion suggests a rise of 64.09% from the year-ago quarter’s levels.
Bank Stocks Worth a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
BankUnited (BKU - Free Report) has an Earnings ESP of +4.84% and carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2023 results on Apr 25.
Over the past month, the Zacks Consensus Estimate for BKU’s first-quarter earnings has been revised marginally downward.
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NII to Support M&T Bank's (MTB) Q1 Earnings, Expenses to Hurt
M&T Bank Corporation (MTB - Free Report) is scheduled to report first-quarter 2023 results on Apr 17, before the opening bell. The bank’s earnings and revenues are expected to have increased from the year-ago reported figure.
In the prior quarter, M&T Bank surpassed the Zacks Consensus Estimate on a rise in net interest income (NII), supported by solid loan demand and higher rates. However, an increase in credit costs and higher expenses acted as headwinds.
M&T Bank has a decent earnings surprise history, having surpassed estimates in two of the last four quarters, missed once and matched in the other. The company has a trailing four-quarter earnings surprise of 3.50%, on average.
M&T Bank Corporation Price and EPS Surprise
M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote
Key Factors to Note
NII: There was a considerable decline in commercial lending, as the lending environment weakened sequentially in the quarter. Given M&T Bank’s substantial exposure to commercial and commercial real estate loans, the company is likely to have been affected. However, commercial real estate loans, residential real estate loans and consumer loans improved modestly in January and February per the Fed’s latest data.
Management expected to witness growth in commercial and industrial loans in the quarter on the back of solid loan strength. Its average loan balances increased to $131.5 billion as of Feb 28, from $129.4 billion as of Dec 31, 2022. Also, MTB increased investments in securities to $2.5 billion (as of Feb 28), which is likely to have increased its average interest earning assets.
The Zacks Consensus Estimate for first-quarter average interest-earning assets of $179.9 billion suggests a marginal rise from the prior quarter’s reported number. We estimate the metric to be $170.2 billion.
The Federal Reserve raised rates by 50 basis points in the quarter and 25 bps in the prior quarter. The policy rate reached 4.75-5%, the highest since 2008. Hence, decent loan growth and higher rates are likely to have a positive impact on the NII, partially offset by the higher deposit costs as the deposit mix has been shifting to higher cost products throughout the quarter.
The Zacks Consensus Estimate for first-quarter NII of $1.8 billion suggests a 1.42% decrease from the prior-quarter’s reported number. We estimate for the metric matches the Zacks Consensus Estimate.
Fee Income: M&T Bank is anticipated to have witnessed a decline in trust revenues on a disappointing equity market performance in the to-be-reported quarter. The Zacks Consensus Estimate of $195 is in line with the prior-quarter’s reported number. We estimate the trust income to be $201 million for the quarter.
The company removed non-sufficient fund fees and overdraft protection transfer charges from linked-deposit accounts, as well as reduced overdraft fees to $15 in second-quarter 2022. This is likely to have an adverse impact on revenues from service charges on deposits in the to-be-reported quarter compared with the prior-year quarter.
The purchase mortgage originations are expected to have continued to decline in the first quarter, whereas refinancing originations are anticipated to have been stable. Also, in the first quarter, mortgage rates remained almost stable, with the rate on the 30-year fixed mortgage reaching 6.32% in March. The rates have jumped from around 3% in the prior-year quarter.
The climb in mortgage rates has taken a toll on the origination market. These factors are expected to have lowered MTB’s mortgage banking revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for total other income of $569 million suggests a slip of 16.57% from the prior-quarter’s reported level. We estimate the metric to be $607 million.
Expenses: The company’s expense base is expected to have been under pressure amid seasonally higher compensation expenses of $100-$105 million in the first quarter of 2023. Also, due to M&T Bank’s acquisition of People’s United in second-quarter 2022, expenses in the quarter under review are likely to be elevated than that reported in the prior-year quarter.
Managements’ expectation of increasing expenses sequentially in the quarter is likely to limit operational efficiency and bottom-line growth. We estimate the metric to be $1.4 billion.
Here is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict an earnings beat for M&T Bank this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is -2.99%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Estimate Trend
Prior to the first-quarter earnings release, the company is witnessing downward estimate revisions, reflecting the bearish sentiment of analysts. The Zacks Consensus Estimate for first-quarter earnings has been revised 1.7% south to $4.03 in the past week. Nonetheless, the figure suggests a year-over-year rise of 47.62%.
The consensus estimate for revenues of $2.37 billion suggests a rise of 64.09% from the year-ago quarter’s levels.
Bank Stocks Worth a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
BankUnited (BKU - Free Report) has an Earnings ESP of +4.84% and carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2023 results on Apr 25.
Over the past month, the Zacks Consensus Estimate for BKU’s first-quarter earnings has been revised marginally downward.
Citigroup (C - Free Report) is scheduled to release first-quarter 2023 earnings on Apr 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.56%. You can see the complete list of today’s Zacks #1 Rank stocks here.
C’s quarterly earnings estimates have moved marginally downward over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.