M&T Bank Earnings: A Steady Start to 2024

Key Morningstar Metrics for M&T Bank

• Fair Value Estimate: $160.00
• 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 start to 2024. Revenue for the first quarter was in line with the FactSet consensus, while adjusted earnings per share of $3.15 topped the average estimate of $3.01. With fewer rate cuts, M&T now expects full-year 2024 net interest income over $6.8 billion (our estimate: $6.87 billion), up from the previous expectation of $6.7 billion. The firm left its other guidance largely unchanged. We maintain our narrow moat rating and $160 fair value estimate for the stock.

Average deposits were roughly flat sequentially, with a 3% decline in noninterest-bearing deposits mostly offset by a 1% increase in interest-bearing deposits. Overall, the firm’s deposit cost was 2.06%, a modest uptick from 2.01% in the fourth quarter. This pressure was partly the reason for the firm’s net interest margin declining to 3.52% from 3.61% sequentially.

With 24% of the firm’s loan book in commercial real estate and 43% in commercial and industrial, credit is understandably a focus, but metrics seem mostly healthy so far. Net charge-offs declined slightly to 0.42% from 0.44% in the fourth quarter, but are still up substantially from the year-ago quarter. Nonaccrual loans (those typically 90 days past due) decreased for commercial real estate but increased for commercial and industrial loans. This suggests some commercial real estate pressure on the bank may be easing.

Interestingly, the bank is seeing pressure in nonauto dealer (RV and marine) loans, as high interest rates impact these discretionary purchases. The firm’s provisioning is exceeding its net charge-off, which means it’s building its allowance for future losses, which could potentially prove conservative. Noninterest revenue was roughly flat sequentially as lower mortgage banking revenue was offset by higher other revenue.