We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why a Q2 Earnings Beat Is Less Likely for M&T Bank (MTB)
Read MoreHide Full Article
M&T Bank Corporation (MTB - Free Report) is scheduled to report second-quarter 2023 results on Jul 19, before the opening bell. The bank’s earnings and revenues are expected to have witnessed a year-over-year improvement.
In the last reported quarter, M&T Bank surpassed the Zacks Consensus Estimate on a rise in net interest income (NII) supported by decent loan demand and higher rates. Other income improved in the quarter. However, an increase in credit costs and higher expenses acted as headwinds.
The stock has surpassed the consensus estimate in two of the trailing four quarters, missed once and matched in the other. It has a four-quarter negative earnings surprise of 1.01%, on average.
Loans & NII: The overall lending environment weakened sequentially in the second quarter. Specifically, the demand for commercial real estate loans, and commercial and industrial loans was softer in April and May, per the Fed’s latest data. Given M&T Bank’s substantial exposure to commercial loans, its loan growth in the quarter under review is likely to have been affected.
The Zacks Consensus Estimate for average earning assets of $182.93 billion indicates a sequential decline of 1%.
Nonetheless, per the company’s release, as of May end, its average loan balances increased to $133.5 billion from $132 billion as of Mar 31, 2023.
We estimate average interest earning assets to rise 2.6% sequentially to $188.76 billion.
While Fed kept rates unchanged during the June FOMC meeting, it increased rates by 25 basis points in May. The policy rate now stands at 5-5.25%.
Despite the high interest rate environment, softer loan demand and rising funding costs are anticipated to have negatively impacted NII during the quarter to be reported.
The Zacks Consensus Estimate for NII of $1.77 billion suggests a 2.4% decrease from the prior-quarter’s reported number. We estimate the metric to be $1.76 billion.
Fee Income: Trust income is likely to have declined in the to-be reported quarter due to the sale of its collective investment trust (CIT) business. The Zacks Consensus Estimate for the metric of $189 million indicates a 2.6% sequential decline.
The consensus estimate for trading account and other non-hedging derivative gains is pegged at $9.23 million, reflecting a decline of 21% sequentially.
The consensus mark for other revenues from operations is pegged at $151 million, implying a fall of 5.6% sequentially.
As of May end, MTB’s average deposit balances decreased to $158.1 billion from $161.5 billion as of Mar 31, 2023. Further, the company removed non-sufficient fund fees and overdraft protection transfer charges from linked-deposit accounts. This is likely to have negatively impacted revenues from service charges on deposits in the to-be-reported quarter.
Nonetheless, the consensus estimate for the metric is pegged at $117 million, indicating a 2.6% rise sequentially.
However, in the quarter under review, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from 4.6% reported in the prior-year quarter. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market for both purchase and refinancing.
The bulk purchase of mortgage servicing rights (MSR) at the end of March is expected to have supported mortgage servicing revenues to some extent. The Zacks Consensus Estimate for mortgage banking revenues of $94 million indicates a sequential increase of 10.6%.
The Zacks Consensus Estimate for brokerage services income of $24.8 million suggests a marginal rise from the first-quarter reported figure.
The consensus estimate for a loss on bank investment securities of $0.18 million implies an improvement from a loss of $0.42 million recorded in first-quarter 2023.
The consensus mark for total other income of $621 million suggests sequential growth of 5.8%. We estimate the metric to be $597.7 million.
Expenses: The company’s expense base is expected to have declined sequentially in the to-be-reported quarter. This is because first quarter recorded seasonally higher compensation expense. Also, the sale of CIT business is likely to reduce expenses. These reductions are likely to be partially offset by the bulk MSR purchase.
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. But that’s 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 -0.33%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Q2 Earnings & Sales Projections
Prior to the second-quarter earnings release, the company is witnessing downward estimate revisions, reflecting bearish analyst sentiments. The Zacks Consensus Estimate for second-quarter earnings has been revised marginally south to $4.14 per share in the past week. Nonetheless, the figure suggests a year-over-year rise of 33.55%. Our estimate for the metric is $3.98.
The consensus estimate for revenues of $2.39 billion suggests a rise of 20.41% from the year-ago quarter’s levels. Our estimate for the metric is $2.36 billion.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Byline Bancorp, Inc. (BY - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
Image: Shutterstock
Why a Q2 Earnings Beat Is Less Likely for M&T Bank (MTB)
M&T Bank Corporation (MTB - Free Report) is scheduled to report second-quarter 2023 results on Jul 19, before the opening bell. The bank’s earnings and revenues are expected to have witnessed a year-over-year improvement.
In the last reported quarter, M&T Bank surpassed the Zacks Consensus Estimate on a rise in net interest income (NII) supported by decent loan demand and higher rates. Other income improved in the quarter. However, an increase in credit costs and higher expenses acted as headwinds.
The stock has surpassed the consensus estimate in two of the trailing four quarters, missed once and matched in the other. It has a four-quarter negative earnings surprise of 1.01%, on average.
M&T Bank Price and EPS Surprise
M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote
Key Factors & Q2 Estimates
Loans & NII: The overall lending environment weakened sequentially in the second quarter. Specifically, the demand for commercial real estate loans, and commercial and industrial loans was softer in April and May, per the Fed’s latest data. Given M&T Bank’s substantial exposure to commercial loans, its loan growth in the quarter under review is likely to have been affected.
The Zacks Consensus Estimate for average earning assets of $182.93 billion indicates a sequential decline of 1%.
Nonetheless, per the company’s release, as of May end, its average loan balances increased to $133.5 billion from $132 billion as of Mar 31, 2023.
We estimate average interest earning assets to rise 2.6% sequentially to $188.76 billion.
While Fed kept rates unchanged during the June FOMC meeting, it increased rates by 25 basis points in May. The policy rate now stands at 5-5.25%.
Despite the high interest rate environment, softer loan demand and rising funding costs are anticipated to have negatively impacted NII during the quarter to be reported.
The Zacks Consensus Estimate for NII of $1.77 billion suggests a 2.4% decrease from the prior-quarter’s reported number. We estimate the metric to be $1.76 billion.
Fee Income: Trust income is likely to have declined in the to-be reported quarter due to the sale of its collective investment trust (CIT) business. The Zacks Consensus Estimate for the metric of $189 million indicates a 2.6% sequential decline.
The consensus estimate for trading account and other non-hedging derivative gains is pegged at $9.23 million, reflecting a decline of 21% sequentially.
The consensus mark for other revenues from operations is pegged at $151 million, implying a fall of 5.6% sequentially.
As of May end, MTB’s average deposit balances decreased to $158.1 billion from $161.5 billion as of Mar 31, 2023. Further, the company removed non-sufficient fund fees and overdraft protection transfer charges from linked-deposit accounts. This is likely to have negatively impacted revenues from service charges on deposits in the to-be-reported quarter.
Nonetheless, the consensus estimate for the metric is pegged at $117 million, indicating a 2.6% rise sequentially.
However, in the quarter under review, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from 4.6% reported in the prior-year quarter. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market for both purchase and refinancing.
The bulk purchase of mortgage servicing rights (MSR) at the end of March is expected to have supported mortgage servicing revenues to some extent. The Zacks Consensus Estimate for mortgage banking revenues of $94 million indicates a sequential increase of 10.6%.
The Zacks Consensus Estimate for brokerage services income of $24.8 million suggests a marginal rise from the first-quarter reported figure.
The consensus estimate for a loss on bank investment securities of $0.18 million implies an improvement from a loss of $0.42 million recorded in first-quarter 2023.
The consensus mark for total other income of $621 million suggests sequential growth of 5.8%. We estimate the metric to be $597.7 million.
Expenses: The company’s expense base is expected to have declined sequentially in the to-be-reported quarter. This is because first quarter recorded seasonally higher compensation expense. Also, the sale of CIT business is likely to reduce expenses. These reductions are likely to be partially offset by the bulk MSR purchase.
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. But that’s 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 -0.33%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Q2 Earnings & Sales Projections
Prior to the second-quarter earnings release, the company is witnessing downward estimate revisions, reflecting bearish analyst sentiments. The Zacks Consensus Estimate for second-quarter earnings has been revised marginally south to $4.14 per share in the past week. Nonetheless, the figure suggests a year-over-year rise of 33.55%. Our estimate for the metric is $3.98.
The consensus estimate for revenues of $2.39 billion suggests a rise of 20.41% from the year-ago quarter’s levels. Our estimate for the metric is $2.36 billion.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Byline Bancorp, Inc. (BY - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
BY currently has an Earnings ESP of +3.59% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Jul 27.
The Zacks Consensus Estimate for BY’s second-quarter earnings has remained unchanged over the past 60 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.