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M&T Bank (MTB) Q1 Earnings Miss Estimates, Expenses Rise Y/Y

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M&T Bank Corporation’s (MTB - Free Report) first-quarter 2024 net operating earnings per share of $3.09 missed the Zacks Consensus Estimate of $3.13. Also, the bottom line compared unfavorably with the $4.09 earned in the year-ago quarter.

Shares of MTB gained nearly 4% in pre-market trading despite lower-than-anticipated earnings. A full day’s trading will depict a better picture.

Results were adversely impacted by the rise in provision for credit losses, a decline in net interest income (NII) and higher expenses. On the other hand, a rise in loans and leases, and higher rates offered some support.

Net income available to common shareholders was $505 million, which decreased 25.3% from the prior-year quarter.

Revenues Down & Expenses Rise

M&T Bank’s quarterly revenues were $2.26 billion, in line with the consensus estimate. However, the reported figure decreased 6% year over year.

NII (tax equivalent) fell 7.6% year over year to $1.69 billion. Our estimate for the metric was $1.7 billion. The decrease was due to a lower net interest margin, which shrunk 52 basis points to 3.52%.

Total non-interest income was $580 million, down 1.2% year over year. The fall was mainly attributable to a decline in trust income, trading account and non-hedging derivative gains and other revenues from operations.

Total non-interest expenses came in at $1.4 billion, increasing 2.7% year over year. The rise was primarily due to higher salaries and employee benefits expenses, equipment and net occupancy, outside data processing and software, FDIC assessments and other costs of operations.

The efficiency ratio was 60.8%, up from 55.5% in the year-earlier quarter. A higher ratio indicates a fall in profitability.

Loans and leases, net of unearned discount, were $134.97 billion as of Mar 31, 2024, marginally up from the prior quarter. Total deposits rose 2.4% to $167.2 billion.

Credit Quality Mixed

Net charge-offs increased 97.1% to $138 million from $70 million in the prior-year quarter. The company recorded a provision for credit losses of $200 million compared with $120 million in the year-ago quarter. Our estimate for the metric was $196.7 million.

Nonetheless, non-performing assets declined 10% year over year to $2.34 billion. Also, the ratio of non-accrual loans to total net loans was 1.71%, down year over year from 1.92%.

Capital Position Strong, Profitability Ratios Weaken

M&T Bank’s estimated Common Equity Tier 1 ratio was 11.07%, up from 10.16% as of first-quarter 2023. The tangible equity per share was $99.54, up from $88.81 as of first-quarter 2023.

M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity were 1.08% and 12.67% compared with 1.49% and 19%, respectively, in the prior-year quarter.

Share Repurchase Update

The company did not repurchase any shares of its common stock in the first quarter of 2024.

Our View

The rising provision for credit losses on account of the challenging operating backdrop is concerning. Also, elevated operating expenses can impede the bottom line going forward. However, the solid loan balance will likely continue aiding organic growth.

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

Wells Fargo & Company’s (WFC - Free Report) first-quarter 2024 adjusted earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23.

Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in provisions were other positives. However, the decrease in NII and loan balances and an increase in expenses were the undermining factors for WFC.

Citigroup Inc.’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.

However, C witnessed declines in total loans and deposits in the quarter. Also, a decline in revenues and deteriorating credit quality are near-term woes.

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