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Will Decent Loan Demand Aid M&T Bank's (MTB) Q2 Earnings?
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M&T Bank Corporation (MTB - Free Report) is slated to report second-quarter 2024 results on Jul 18, before the opening bell. The company is expected to have registered year-over-year declines in quarterly revenues and earnings.
In the last reported quarter, M&T Bank’s earnings missed the Zacks Consensus Estimate on a rise in provision for credit losses, a decline in net interest income (NII) and higher expenses. However, a rise in loans and leases, and higher rates offered some support.
Quarterly earnings surpassed the consensus estimate in two of the trailing four quarters and missed twice, the earnings surprise being 0.66%, on average.
The Zacks Consensus Estimate for MTB’s second-quarter earnings of $3.53 has been unchanged in the past seven days. The figure indicates a decline of 31.1% from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.27 billion, suggesting a fall of 12.8% from the prior-year reported level.
Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let us discuss the factors that are likely to have impacted the company’s quarterly performance.
Key Factors & Estimates for Q2
Loans & NII: The demand for commercial and industrial as well as commercial real estate loans was decent in the second quarter of 2024, per the Federal Reserve’s latest data. With the Fed expected to keep the interest rates high for a longer time, there has been a modest improvement in the lending scenario as the borrowers have accepted this fact. Hence, we expect loan growth for M&T Bank to have been decent, given its substantial exposure to commercial and industrial as well as commercial real estate loans.
Management noted that through May 2024, average loans increased $0.7 billion from first-quarter 2024 to $134.5 billion, backed by growth in commercial and industrial loans as well as consumer lending.
This is likely to have positively impacted average interest-earning assets in the quarter. The Zacks Consensus Estimate for average interest-earning assets is pegged at $193.6 billion, suggesting a marginal increase from the prior quarter’s reported figure. Our model estimate is pegged at $194.6 billion.
The inverted yield curve in the June-end quarter and high funding costs are expected to have hurt NII expansion.
Management projects an NII of $1.70 billion. The Zacks Consensus Estimate for NII (on a tax-equivalent basis) of $1.70 billion suggests a 2.6% decline from the prior quarter’s reported number. Also, management expects the net interest margin to be 3.50%. We estimate NII to be $1.67 billion
Fee Income: Through May QTD, average total deposits were down modestly from the first quarter of 2024 due to a decline in brokered deposits, offset by growth in consumer deposits. This is likely to have continued affecting revenues from service charges on deposit accounts in the to-be-reported quarter. The consensus estimate for the metric is pegged at $124 million, indicating to flat from the prior quarter's reported figure. Our estimate expects the metric to be $114 million.
In the second quarter, mortgage rates declined marginally, with the rate on a 30-year fixed mortgage declining to 6.7% in June from 6.8% at the start of April. This is likely to have resulted in a slight rise in mortgage demand. Yet, origination volumes (particularly purchase originations) remained lower than in the prior quarter’s tally due to home price appreciation.
Yet, supported by lower mortgage rates, there is the likelihood of a modest rise in refinancing activities. Also, with the borrowers accepting the fact that interest rates will remain high for a longer period, it is likely to have provided support to MTB’s mortgage banking income.
The Zacks Consensus Estimate for mortgage banking is pegged at $108 million, indicating a 3.8% increase from the prior quarter’s reported figure. We expect the metric to be $100.3 million.
The Zacks Consensus Estimate for brokerage services income of $28 million suggests a marginal decline from the first-quarter 2024 reported figure. We expect the metric to be $23.7 million.
The Zacks Consensus Estimate for trust income of $166 million suggests an increase of 3.8% from the first-quarter 2024 reported figure. Our model suggests the metric to be $162.9 million.
Management expects non-interest income of $570 million. The Zacks Consensus Estimate for the metric to be $580 million in the quarter. We expect the metric to be $585.1 million.
Expenses: The company's expenses are rising as it continues to invest in strengthening franchises. Yet, sequentially lower seasonal compensation expense is likely to have offset it to some extent. Management expects expenses of $1.29-$1.31 billion. Our model expects expenses to be $1.30 billion.
What Our Quantitative Model Predicts
Our proven model predicts an earnings beat for M&T Bank this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is the case here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is +0.31%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
Here are a couple of other finance stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:
Ally Financial Inc. (ALLY - Free Report) is scheduled to release second-quarter 2024 earnings on Jul 17. ALLY, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +2.99%.
The Earnings ESP for Northern Trust Corporation (NTRS - Free Report) is +1.58% and it carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2024 results on Jul 17.
Over the past seven days, the Zacks Consensus Estimate for NTRS’ quarterly earnings has remained unchanged at $1.75.
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Will Decent Loan Demand Aid M&T Bank's (MTB) Q2 Earnings?
M&T Bank Corporation (MTB - Free Report) is slated to report second-quarter 2024 results on Jul 18, before the opening bell. The company is expected to have registered year-over-year declines in quarterly revenues and earnings.
In the last reported quarter, M&T Bank’s earnings missed the Zacks Consensus Estimate on a rise in provision for credit losses, a decline in net interest income (NII) and higher expenses. However, a rise in loans and leases, and higher rates offered some support.
Quarterly earnings surpassed the consensus estimate in two of the trailing four quarters and missed twice, the earnings surprise being 0.66%, on average.
M&T Bank Corporation Price and EPS Surprise
M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote
The Zacks Consensus Estimate for MTB’s second-quarter earnings of $3.53 has been unchanged in the past seven days. The figure indicates a decline of 31.1% from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.27 billion, suggesting a fall of 12.8% from the prior-year reported level.
Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let us discuss the factors that are likely to have impacted the company’s quarterly performance.
Key Factors & Estimates for Q2
Loans & NII: The demand for commercial and industrial as well as commercial real estate loans was decent in the second quarter of 2024, per the Federal Reserve’s latest data. With the Fed expected to keep the interest rates high for a longer time, there has been a modest improvement in the lending scenario as the borrowers have accepted this fact. Hence, we expect loan growth for M&T Bank to have been decent, given its substantial exposure to commercial and industrial as well as commercial real estate loans.
Management noted that through May 2024, average loans increased $0.7 billion from first-quarter 2024 to $134.5 billion, backed by growth in commercial and industrial loans as well as consumer lending.
This is likely to have positively impacted average interest-earning assets in the quarter. The Zacks Consensus Estimate for average interest-earning assets is pegged at $193.6 billion, suggesting a marginal increase from the prior quarter’s reported figure. Our model estimate is pegged at $194.6 billion.
The inverted yield curve in the June-end quarter and high funding costs are expected to have hurt NII expansion.
Management projects an NII of $1.70 billion. The Zacks Consensus Estimate for NII (on a tax-equivalent basis) of $1.70 billion suggests a 2.6% decline from the prior quarter’s reported number. Also, management expects the net interest margin to be 3.50%. We estimate NII to be $1.67 billion
Fee Income: Through May QTD, average total deposits were down modestly from the first quarter of 2024 due to a decline in brokered deposits, offset by growth in consumer deposits. This is likely to have continued affecting revenues from service charges on deposit accounts in the to-be-reported quarter. The consensus estimate for the metric is pegged at $124 million, indicating to flat from the prior quarter's reported figure. Our estimate expects the metric to be $114 million.
In the second quarter, mortgage rates declined marginally, with the rate on a 30-year fixed mortgage declining to 6.7% in June from 6.8% at the start of April. This is likely to have resulted in a slight rise in mortgage demand. Yet, origination volumes (particularly purchase originations) remained lower than in the prior quarter’s tally due to home price appreciation.
Yet, supported by lower mortgage rates, there is the likelihood of a modest rise in refinancing activities. Also, with the borrowers accepting the fact that interest rates will remain high for a longer period, it is likely to have provided support to MTB’s mortgage banking income.
The Zacks Consensus Estimate for mortgage banking is pegged at $108 million, indicating a 3.8% increase from the prior quarter’s reported figure. We expect the metric to be $100.3 million.
The Zacks Consensus Estimate for brokerage services income of $28 million suggests a marginal decline from the first-quarter 2024 reported figure. We expect the metric to be $23.7 million.
The Zacks Consensus Estimate for trust income of $166 million suggests an increase of 3.8% from the first-quarter 2024 reported figure. Our model suggests the metric to be $162.9 million.
Management expects non-interest income of $570 million. The Zacks Consensus Estimate for the metric to be $580 million in the quarter. We expect the metric to be $585.1 million.
Expenses: The company's expenses are rising as it continues to invest in strengthening franchises. Yet, sequentially lower seasonal compensation expense is likely to have offset it to some extent. Management expects expenses of $1.29-$1.31 billion. Our model expects expenses to be $1.30 billion.
What Our Quantitative Model Predicts
Our proven model predicts an earnings beat for M&T Bank this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is the case here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is +0.31%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
Here are a couple of other finance stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this time:
Ally Financial Inc. (ALLY - Free Report) is scheduled to release second-quarter 2024 earnings on Jul 17. ALLY, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +2.99%.
The Earnings ESP for Northern Trust Corporation (NTRS - Free Report) is +1.58% and it carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2024 results on Jul 17.
Over the past seven days, the Zacks Consensus Estimate for NTRS’ quarterly earnings has remained unchanged at $1.75.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.