M&T Bank Earnings: Decent Quarter, but Outlook Soft With Some Credit Deterioration

Key Morningstar Metrics for M&T Bank

• Fair Value Estimate: $168.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of M&T Bank’s Earnings

M&T Bank MTB 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 release that would alter our long-term view. We will maintain our fair value estimate of $168 per share.

Deposits were up 1% sequentially during the quarter amid continued deposit pricing pressures. Interest-bearing deposits were up 5%, while non-interest-bearing deposits were down 7%. Competition for deposits resulted in a deposit cost of 2.01% versus 1.70% in the third quarter.

Credit continues to be important for M&T, given the bank’s commercial real estate exposure. Net chargeoffs were $148 million, or 0.44% of its book, which is elevated relative to recent quarters. The firm’s provision for credit losses of $225 million compares with an average of $128 million during the previous four quarters. Criticized loans (loans that see some weakness but are still performing) increased $1.5 billion in the quarter to $12.6 billion, driven largely by commercial real estate. Overall, we assess the firm’s current losses as manageable.

Fourth-quarter noninterest revenue was up 3% sequentially, driven by higher mortgage banking revenue. Noninterest core expenses grew 2% by our calculations and were well controlled, in our view.

For 2024, M&T expects net interest income of $6.75 billion and fee income of $2.35 billion at the midpoint, which implies total revenue of $9.10 billion. Net chargeoffs are expected to normalize somewhat from fourth-quarter levels, and the firm expects average deposits of $163 billion-$165 billion, in line with our expectations.