M&T Bank Earnings: Net Interest Margin Impresses, Credit Trends Positive

Key Morningstar Metrics for M&T Bank

• Fair Value Estimate: $165.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of M&T Bank’s Earnings

M&T Bank MTB reported a decent third quarter. Earnings per share came in at $4.02, up from $3.73 in the second quarter and $3.98 in the year-ago quarter, benefiting by $0.08 for certain discrete tax items. Net interest margin was up sequentially and at the midpoint, and M&T raised its full-year outlook for net interest income and fee revenue. While M&T’s results were good, our pre-earnings revenue forecast was above the firm’s outlook for 2024, and we do not expect a material change to our fair value estimate of $165 per share.

NII of $1.74 billion was up 1% sequentially, as day count and a higher NIM were offset by slightly lower average assets. NIM benefits both on the asset side (as fixed-rate assets are reinvested) and from deposit costs easing. The bank expects NII to come in greater than $1.73 billion in the fourth quarter, which suggests 2024 NII above $6.89 billion, which compares favorably with the previous outlook of $6.85 billion-$6.90 billion.

Fee income (only about one-fourth of M&T’s revenue) also performed well. Fee revenue of $606 million was up 4% sequentially, thanks to higher service charges on deposits and higher mortgage banking revenue. M&T’s fourth-quarter outlook suggests it will come in at the high end of its previous $2.3 billion-$2.4 billion range.

Credit trends were positive in the quarter. Net charge-offs declined sequentially to 0.35% from 0.41%, and we expect them to stabilize in the 0.40%-0.45% range. Nonaccrual loans declined 5% sequentially and criticized loans were $10.9 billion, down $1.2 billion sequentially, driven largely by commercial real estate. Within commercial real estate, the biggest decline in criticized loans was in healthcare services, where occupancy and repayment activity improved.