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Would Rising Rates Support M&T Bank's (MTB) Q3 Earnings?

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M&T Bank Corporation (MTB - Free Report) is scheduled to report third-quarter 2018 results on Oct 17, before the opening bell. The company’s revenues and earnings are expected to improve from the year-ago quarter.

M&T Bank’s second-quarter 2018 results displayed top-line improvement supported by rising margins. Further, lower provisions for credit losses were reported. The company surpassed the Zacks Consensus Estimate backed by these factors. However, rise in expenses was a negative.

The bank’s earnings surprise history seems decent as it has delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 3.8%.

M&T Bank Corporation Price and EPS Surprise

Activities of M&T Bank during the Sep-end quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter has been revised slightly downward over the last seven days. Nevertheless, the consensus estimate of $3.35 indicates an increase of 49.5% in the bank’s earnings from the prior-year quarter.

Overall, the Zacks Consensus Estimate projects year-over-year revenue growth of 5.8% to $1.50 billion for the to-be-reported quarter.

Factors to Influence Q3 Results

Net Interest Income (NII) to Improve: The quarter witnessed a moderate improvement in the lending scenario primarily in commercial and consumer front. Thus, loan growth, combined with support from expanding margins on the back of rising interest rates, are likely to boost M&T Bank’s NII.

Muted Fee Income Growth: Since performance of the equity markets was not very impressive during the third quarter, M&T Bank is unlikely to have received much support from related fees. Also, debt origination fees will likely have remained low due to rising rates curbing involvement in these activities.

Furthermore, with the rising interest-rate environment, no major help is expected from the mortgage banking segment. As refinancing activities slowed down during the quarter, mortgage banking revenues are not expected to witness much improvement.

Expenses to Trend Higher: Expenses are projected to trend higher in the upcoming release due to the company’s continued investments in several areas, including operational infrastructure and technology.

Finally, let’s have a look at what our quantitative model predicts:

According to our quantitative model, chances of M&T Bank beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for M&T Bank is +0.35%.

Zacks Rank: M&T Bank currently carries a Zacks Rank #3.

Stocks to Consider

Here are some other stocks 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.

BOK Financial Corp. (BOKF - Free Report) is slated to release results on Oct 24. The company has an Earnings ESP of +0.24% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers (CFR - Free Report) is set to report earnings on Oct 25. It has an Earnings ESP of +0.54% and carries a Zacks Rank #3.

Ameriprise Financial (AMP - Free Report) is scheduled to release results on Oct 23. It has an Earnings ESP of +4.30% and it currently carries a Zacks Rank #2.

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