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M&T Bank (MTB) Down 4% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for M&T Bank Corporation (MTB - Free Report) . Shares have lost about 4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
M&T Bank Beats Q2 Earnings Estimates, Revenues Rise
M&T Bank recorded a positive earnings surprise of 4.4% in second-quarter 2017. Net operating earnings of $2.38 per share surpassed the Zacks Consensus Estimate of $2.28. Also, it increased 15% on year-over-year basis.
Results reflected higher revenues. Further, rise in margin and a solid capital position were the other positives. However, deteriorating credit quality was a major headwind.
Net operating income came in at $386 million, up around 10% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $2.35 also jumped 18.7% year over year. Net income climbed 13.4% year over year to $381 million.
Net Interest Income & Fee Income Growth Boost Revenues, Costs Rise
M&T Bank’s net revenue came in at $1,399 million, lagging the Zacks Consensus Estimate of $1,401.6 million. However, it compared favorably with the year-ago quarter figure of $1,312 million.
Taxable-equivalent net interest income increased 9% year over year to $947 million in the quarter. Further, net interest margin expanded 11 basis points (bps) to 3.45%.
Supported by growth in trust income and other revenues, the company’s other income climbed 3% year over year to $461 million.
Non-interest expenses were $751 million, marginally up from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $743 million, up 2.3% from the year-ago quarter. The rise was driven by increased legal costs, FDIC assessments, outside data processing and software expenses.
Efficiency ratio improved to 52.7% from 55.1% in the prior-year quarter. Generally, a lower ratio indicates increased efficiency.
Loans and leases, net of unearned discount, decreased slightly sequentially to $89.1 billion at the end of the quarter. Moreover, total deposits dropped 3.6% from the previous quarter to $93.5 billion.
M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.33% and 14.18%, respectively, compared with 1.18% and 12.68% in the prior-year quarter.
Credit Quality: A Mixed Bag
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses increased 63% year over year to $52 million. Net charge-offs of loans came in at $45 million, up 86% year over year.
Further, the ratio of non-accrual loans to total net loans was 0.98%, up from 0.96% in the prior-year quarter. Additionally, allowance for credit losses to total loans was 1.13%, up 3 bps from the year-ago quarter.
However, non-performing assets decreased 4% year over year to $977 million.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.8%. Tangible equity per share came in at $68.20, up 1.9% year over year.
Share Repurchase
During the second quarter, the company repurchased 1.4 million shares of common stock for a total cost of $225 million at an average cost per share of $159.52.
Outlook
For the rest of 2017, average loan growth is expected in the low-single-digit range on a year- over-year basis, driven by continued pay downs on residential mortgage loans partially offset by modest growth in commercial and consumer loans.
Management expects modest expansion of NIM and growth in NII compared to the first half of 2017 on the assumption of rate hikes in late 2017.
Management anticipates other fee businesses to grow in low- to mid-single-digit range. Further, low nominal growth in total operating expenses is expected.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, the stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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M&T Bank (MTB) Down 4% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for M&T Bank Corporation (MTB - Free Report) . Shares have lost about 4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
M&T Bank Beats Q2 Earnings Estimates, Revenues Rise
M&T Bank recorded a positive earnings surprise of 4.4% in second-quarter 2017. Net operating earnings of $2.38 per share surpassed the Zacks Consensus Estimate of $2.28. Also, it increased 15% on year-over-year basis.
Results reflected higher revenues. Further, rise in margin and a solid capital position were the other positives. However, deteriorating credit quality was a major headwind.
Net operating income came in at $386 million, up around 10% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $2.35 also jumped 18.7% year over year. Net income climbed 13.4% year over year to $381 million.
Net Interest Income & Fee Income Growth Boost Revenues, Costs Rise
M&T Bank’s net revenue came in at $1,399 million, lagging the Zacks Consensus Estimate of $1,401.6 million. However, it compared favorably with the year-ago quarter figure of $1,312 million.
Taxable-equivalent net interest income increased 9% year over year to $947 million in the quarter. Further, net interest margin expanded 11 basis points (bps) to 3.45%.
Supported by growth in trust income and other revenues, the company’s other income climbed 3% year over year to $461 million.
Non-interest expenses were $751 million, marginally up from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $743 million, up 2.3% from the year-ago quarter. The rise was driven by increased legal costs, FDIC assessments, outside data processing and software expenses.
Efficiency ratio improved to 52.7% from 55.1% in the prior-year quarter. Generally, a lower ratio indicates increased efficiency.
Loans and leases, net of unearned discount, decreased slightly sequentially to $89.1 billion at the end of the quarter. Moreover, total deposits dropped 3.6% from the previous quarter to $93.5 billion.
M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.33% and 14.18%, respectively, compared with 1.18% and 12.68% in the prior-year quarter.
Credit Quality: A Mixed Bag
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses increased 63% year over year to $52 million. Net charge-offs of loans came in at $45 million, up 86% year over year.
Further, the ratio of non-accrual loans to total net loans was 0.98%, up from 0.96% in the prior-year quarter. Additionally, allowance for credit losses to total loans was 1.13%, up 3 bps from the year-ago quarter.
However, non-performing assets decreased 4% year over year to $977 million.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.8%. Tangible equity per share came in at $68.20, up 1.9% year over year.
Share Repurchase
During the second quarter, the company repurchased 1.4 million shares of common stock for a total cost of $225 million at an average cost per share of $159.52.
Outlook
For the rest of 2017, average loan growth is expected in the low-single-digit range on a year- over-year basis, driven by continued pay downs on residential mortgage loans partially offset by modest growth in commercial and consumer loans.
Management expects modest expansion of NIM and growth in NII compared to the first half of 2017 on the assumption of rate hikes in late 2017.
Management anticipates other fee businesses to grow in low- to mid-single-digit range. Further, low nominal growth in total operating expenses is expected.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
M&T Bank Corporation Price and Consensus
M&T Bank Corporation Price and Consensus | M&T Bank Corporation Quote
VGM Scores
At this time, the stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.