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Why Is M&T Bank (MTB) Up 4.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for M&T Bank (MTB - Free Report) . Shares have added about 4.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is M&T Bank due for a pullback? 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 catalysts.
M&T Bank Q3 Earnings Beat Estimates, Expenses Decline
M&T Bank reported net operating earnings of $3.56 per share in third-quarter 2018, surpassing the Zacks Consensus Estimate of $3.35. Also, the bottom line improved 59% year over year.
The company recorded a rise in revenues, supported by margin expansion. Moreover, improved credit quality and lower expenses were other positive factors. However, decrease in loan and deposit balances was a headwind.
Net operating income came in at $531 million, up around 60% from $361 million recorded in the year-ago quarter.
On a GAAP basis, M&T Bank’s earnings per share of $3.53 jumped 39% year over year. Net income soared 48% to $526 million.
Revenues Increase, Expenses Decline, Loans & Deposits Fall
M&T Bank’s revenues came in at $1.49 billion, comparing favorably with the year-ago figure of $1.43 billion. However, it lagged the Zacks Consensus Estimate of $1.50 billion.
Taxable-equivalent net interest income increased 7% year over year to $1.04 billion in the quarter, driven by higher net interest margin, partly offset by lower average earning assets. Furthermore, net interest margin expanded 35 basis points (bps) to 3.88%.
The company’s non-interest income remained stable year over year at $459 million. Higher trust and other income were offset by lower brokerage services income and mortgage banking revenues.
Non-interest expenses were $776 million, down 4% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $770 million, declining 3.5% from the year-ago quarter. The fall reflected lower amortization costs and other expenses, partially offset by increased advertising and marketing expenses, along with outside data processing and software.
Efficiency ratio came in at 51.4%, down from 56% in the prior-year quarter. Lower ratio indicates a rise in profitability.
Loans and leases, net of unearned discount, fell 1.4% year over year to $86.7 billion at the end of the reported quarter. Additionally, total deposits declined 5% to $89.1 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 1.89% and 21%, respectively, compared with 1.25% and 13.03% recorded in the prior-year quarter.
Credit Quality Improves
M&T Bank reflected an improved credit quality in the reported quarter. Provision for credit losses shrunk 47% year over year to $16 million. Also, net charge-offs of loans came in at $16 million, down 36% from a year ago.
The ratio of non-accrual loans to total net loans was 1%, up 1 bps from a year ago. Non-performing assets decreased 2% year over year to $958 million.
Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were around 10.44%. Tangible equity per share came in at $67.64, down 2% year over year from $69.02.
Share Repurchase
During the September-end quarter, M&T Bank repurchased a total of 2.84 million shares of its common stock for a total cost of $498 million.
Outlook for 2018
Management expects that slowdown in commercial lending scenario along with mortgage loan portfolio runoff are likely to weigh on average loan growth in 2018. However, seasonal strength in dealer floor plan loans in the fourth quarter might lend support.
Net interest margin is expected to improve in the fourth quarter. However, management feels that the benefit to margins as a result of each rate hike is gradually declining, as markets are normalizing and deposits are becoming more expensive, behaving in a manner more consistent with prior cycles.
Residential mortgage origination activity is anticipated to remain challenged by higher long-term interest rates. However, the mortgage subservicing contract might partially offset the revenue pressures that come with the natural aging of the servicing book. Notably, remaining fee businesses are likely to remain stable, with growth in low to mid-single digits.
Management expects low, nominal, annual growth in total operating expenses, excluding first quarter’s $135 million addition to the reserve for the Wilmington Trust Corporation shareholder litigation.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, M&T Bank has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, M&T Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is M&T Bank (MTB) Up 4.7% Since Last Earnings Report?
A month has gone by since the last earnings report for M&T Bank (MTB - Free Report) . Shares have added about 4.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is M&T Bank due for a pullback? 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 catalysts.
M&T Bank Q3 Earnings Beat Estimates, Expenses Decline
M&T Bank reported net operating earnings of $3.56 per share in third-quarter 2018, surpassing the Zacks Consensus Estimate of $3.35. Also, the bottom line improved 59% year over year.
The company recorded a rise in revenues, supported by margin expansion. Moreover, improved credit quality and lower expenses were other positive factors. However, decrease in loan and deposit balances was a headwind.
Net operating income came in at $531 million, up around 60% from $361 million recorded in the year-ago quarter.
On a GAAP basis, M&T Bank’s earnings per share of $3.53 jumped 39% year over year. Net income soared 48% to $526 million.
Revenues Increase, Expenses Decline, Loans & Deposits Fall
M&T Bank’s revenues came in at $1.49 billion, comparing favorably with the year-ago figure of $1.43 billion. However, it lagged the Zacks Consensus Estimate of $1.50 billion.
Taxable-equivalent net interest income increased 7% year over year to $1.04 billion in the quarter, driven by higher net interest margin, partly offset by lower average earning assets. Furthermore, net interest margin expanded 35 basis points (bps) to 3.88%.
The company’s non-interest income remained stable year over year at $459 million. Higher trust and other income were offset by lower brokerage services income and mortgage banking revenues.
Non-interest expenses were $776 million, down 4% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $770 million, declining 3.5% from the year-ago quarter. The fall reflected lower amortization costs and other expenses, partially offset by increased advertising and marketing expenses, along with outside data processing and software.
Efficiency ratio came in at 51.4%, down from 56% in the prior-year quarter. Lower ratio indicates a rise in profitability.
Loans and leases, net of unearned discount, fell 1.4% year over year to $86.7 billion at the end of the reported quarter. Additionally, total deposits declined 5% to $89.1 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 1.89% and 21%, respectively, compared with 1.25% and 13.03% recorded in the prior-year quarter.
Credit Quality Improves
M&T Bank reflected an improved credit quality in the reported quarter. Provision for credit losses shrunk 47% year over year to $16 million. Also, net charge-offs of loans came in at $16 million, down 36% from a year ago.
The ratio of non-accrual loans to total net loans was 1%, up 1 bps from a year ago. Non-performing assets decreased 2% year over year to $958 million.
Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were around 10.44%. Tangible equity per share came in at $67.64, down 2% year over year from $69.02.
Share Repurchase
During the September-end quarter, M&T Bank repurchased a total of 2.84 million shares of its common stock for a total cost of $498 million.
Outlook for 2018
Management expects that slowdown in commercial lending scenario along with mortgage loan portfolio runoff are likely to weigh on average loan growth in 2018. However, seasonal strength in dealer floor plan loans in the fourth quarter might lend support.
Net interest margin is expected to improve in the fourth quarter. However, management feels that the benefit to margins as a result of each rate hike is gradually declining, as markets are normalizing and deposits are becoming more expensive, behaving in a manner more consistent with prior cycles.
Residential mortgage origination activity is anticipated to remain challenged by higher long-term interest rates. However, the mortgage subservicing contract might partially offset the revenue pressures that come with the natural aging of the servicing book. Notably, remaining fee businesses are likely to remain stable, with growth in low to mid-single digits.
Management expects low, nominal, annual growth in total operating expenses, excluding first quarter’s $135 million addition to the reserve for the Wilmington Trust Corporation shareholder litigation.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, M&T Bank has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, M&T Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.