M&T Bank Earnings: Net Interest Income Benefiting From Stable Deposit Costs

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 solid second quarter. Earnings per share came in at $3.73, an improvement from $3.02 in the first quarter but down from $4.11 last year. Credit was healthy, and net interest margin benefited from stable deposit costs and rising yields on investment securities on the asset side of the bank’s balance sheet. The firm made only minor tweaks to its 2024 outlook. Overall, there was little to alter our long-term view of the firm, and we maintain our fair value estimate of $160 per share.

NII of $1.73 billion was up 2% sequentially but down 5% from the year-ago period. Sequentially, average deposits were roughly stable, and noninterest-bearing deposits were down just 2%. Deposit pricing is stable, and with investment securities getting repriced, the firm’s net interest margin increased to 3.59% from 3.52% in the first quarter. M&T expects net interest income to be $6.85 billion-$6.90 billion for 2024, roughly in line with the previous outlook of about $6.85 billion. This suggests roughly stable levels of net interest income in the second half, and we do not expect rate cuts to have a big impact on the firm.

Fee revenue, which represented about one-quarter of the firm’s revenue in the second quarter, was up 1% sequentially and 1% from the year-ago period, adjusting for the gain on the CIT sale. Credit trends were mostly stable and showed some improvement. Net charge-offs were 0.41%, essentially unchanged from 0.42% in the first quarter. Nonaccrual loans dipped, which is a positive leading indicator, in our view.

M&T remains focused on reducing its commercial real estate exposure. Commercial real estate loans averaged 23.4% of its loan book in the quarter, down from 24.4% in the first quarter and 26.1% in the year-ago quarter. There was little surprise on the expense side, and the firm maintained its outlook of $5.25 billion-$5.30 billion for the full year.