Company Reports

M&T Bank reported a decent start to 2024. First-quarter 2024 revenue was in line with the FactSet consensus, while adjusted EPS of $3.15 topped the FactSet consensus estimate of $3.01. With fewer rate cuts, M&T now expects net interest income to be above $6.8 billion for full-year 2024 (our estimate: $6.87 billion), which is an uptick from the previous expectation of $6.7 billion to $6.8 billion. The firm left its other guidance largely unchanged. Overall, we will maintain our narrow moat rating and $160 fair value estimate on the firm’s shares.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank has a valuable commercial real estate franchise, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

Our thesis on the U.S. banks following the Silicon Bank fallout was that all of the banks we covered, except for First Republic (which we downgraded to a $3 fair value estimate on March 20, 2023, and a $0 fair value on April 27, 2023), would be able to weather the storm. We believed that banks in trouble were in uniquely risky positions. We believe this thesis has largely held up, and sorting through banks based on their unique risk profiles remains necessary and valuable. To the extent that the market is selling off all banks because of what has happened to NYCB, we think there could be opportunities once again while acknowledging the significant time horizon risk (how long does it take for the banks to prove to the market they are fine) and the choppy waters that could occur in the meantime (we expect more commercial real estate related loan losses in the future).

Narrow-moat M&T Bank reported decent fourth-quarter results, with revenue of $2.30 billion roughly in line with the FactSet consensus estimate of $2.29 billion. The firm's outlook at the midpoint implies $9.10 billion in 2024 revenue, a bit below the FactSet consensus estimate of $9.13 billion and our estimate of $9.24 billion. Overall, there was little in the earnings release that would alter our long-term view. We will maintain our fair value estimate of $168 per share.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank has a valuable commercial real estate franchise, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank has a valuable commercial real estate franchise, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

Narrow-moat M&T Bank reported decent results, with EPS coming in at $3.98, ahead of our forecast of $3.76 and FactSet consensus of $3.88. After factoring in current results and updated guidance, net interest income, is trending toward the high end of the bank's previous guidance, fees are trending as expected, and expenses are on the high end. Overall, these are minor differences. Deposit costs came in ahead of our expectations, and higher funding costs continue to be a pattern among the regional banks this quarter. Even so, the bank is seeing enough repricing on assets that the overall NII outlook, which is what matters, is intact. As we incorporate this quarter's results, we anticipate some minor increases to our expense outlook, which could lead to a slight decline in our fair value estimate of $169. We still view shares as undervalued. We like the bank's position as a conservative lender with lower duration risk than peers'. We assess the bank could easily meet the requirements from the Basel III Endgame proposal, with accumulated other comprehensive income inclusion decreasing the common equity Tier 1 ratio by only 36 basis points, still giving it a buffer above regulatory minimum levels even if regulations changed today.

Narrow-moat-rated M&T Bank reported decent second-quarter results, which supported our overall thesis that while there will be incremental pressure on funding costs and net interest income, or NII, it will be manageable. The bank's EPS of $5.05 beat our own estimate (of $4.31) and the FactSet consensus (at $4.16), largely due to a one-time gain on the sale of the bank's Collective Investment trust, or CIT, unit. Adjusted EPS of $4.11 was closer to our estimate, with the main difference being slightly higher expenses.

The Federal Reserve has released the results of its annual stress tests. Our key takeaway is that the banking system remains well capitalized, and stress capital buffers, or SCBs, are likely to be declining for nearly half of the banks we cover who participated in the test this year. This will bring some capital relief to some key names under our coverage, including JPMorgan, Bank of America, M&T Bank, Goldman Sachs, and Morgan Stanley. Whether or not management teams will actually lower their internal common equity Tier 1 targets is another story. As they await other potential regulatory changes, we expect most would choose to err on the side of holding more capital rather than less. Even so, we would view these banks as the big winners from this year’s stress tests as results are set to give these banks more buffer space for now.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank's main stronghold is its commercial real estate operations, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

The Federal Reserve released its review of what went wrong with supervision and regulation of Silicon Valley Bank. There are still no official new regulatory proposals, but this is the first official clue about where the regulators are heading. Our thesis was that regulations were going to change but that they would be manageable changes phased in over a period of several years. This is why we do not think capital raises are likely for the banks under our coverage. We think this is a key point because prices currently seem to be implying permanently impaired profitability or capital raises for multiple banks under our coverage. We think this is too harsh.

Narrow-moat-rated M&T Bank gave us our second look at a regional bank this quarter. It reported decent first-quarter results that we believe support our “some stress but manageable” thesis for the banks. The bank’s full-year outlook was only modestly changed while deposit outflows roughly matched pre-March expectations. We viewed the sector as undervalued heading into first-quarter earnings, and the two regionals that have reported so far (PNC and M&T Bank) have outperformed. While we will not know for sure how each regional is doing until it reports, we think the read-through so far has been positive relative to what stock prices implied earnings. As we incorporate slightly less drastic increases in funding costs, we expect our $163 fair value estimate to increase by a low- to mid-single-digit percentage; we view the shares as undervalued.

We have updated our fair value estimates for a number of regional banks in our coverage (M&T Bank: $179 to $163, Fifth Third Bancorp: $42 to $38, Regions Financial: $21 to $19, KeyCorp: $24 to $21, Huntington: $17 to $15, Comerica: $86 to $79 , Zions: $66 to $58, Cullen/Frost: $133 to $124 ). We did this based on an expectation of increased funding costs, some pressure on deposit bases (in other words, deposit outflows), and potentially lower securities yields in the future due to potential changes in bank regulations (which would likely force banks to hold more short-term treasuries instead of their current preference for mortgage-backed securities).

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank's main stronghold is its commercial real estate operations, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

We are increasing our Morningstar Uncertainty Rating on our U.S. regional banking coverage (excluding U.S. Bancorp and PNC Financial Services) to High from Medium, to reflect the increased uncertainty associated with predicting what the deposit base, funding costs, and regulatory costs will look like in the future. We’re leaving the Uncertainty Ratings on the largest banks unchanged, as we believe they are less likely to experience deposit base volatility.

With the U.S. banking system coming under heightened liquidity pressure, we had speculated that the Federal Reserve might step in and provide some sort of solution. There was a lot of speculation about what mechanism/s could be used, and one of our favorites was simply allowing banks to exchange their underwater securities, at par, with the Fed. This has the benefit of taking away any concerns about being forced to sell these securities at fair value and therefore taking a hit to capital while also exposing the U.S. taxpayer to minimal risk of loss, as most securities held by the banks are either agency-backed MBS or Treasuries.

Bank stocks sold off meaningfully on March 9 as Silicon Valley Bank announced that it would have to take a number of “strategic actions,” including selling off its entire available-for-sale securities portfolio (incurring a $1.8 billion aftertax loss, or roughly 15% of the bank’s tangible common equity as of Dec. 31, 2022), announcing it is seeking to raise $2.25 billion in additional capital, and increasing its use of “term borrowings” (essentially higher-cost but more stable funding). Aside from crypto-related meltdowns, this is one of the first banks we’ve seen that has really suffered a liquidity crunch that has forced it to restructure the balance sheet and realize losses on its securities portfolios.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank's main stronghold is its commercial real estate operations, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

Narrow-moat-rated M&T Bank reported fourth-quarter earnings per share of $4.29, roughly in line with the FactSet consensus of $4.20 and a bit below our own estimate of $4.63. Overall, there were small misses across the income statement compared with our own estimates, with net interest income, or NII, and fees (adjusted for the gain on sale) coming up a bit short, while expenses (adjusted for the charitable contribution) were slightly higher than expected. We wouldn’t read too much into any one quarter’s results, and the 2023 outlook provided additional clarity.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank's main stronghold is its commercial real estate operations, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships.