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Decent Loan Demand to Aid M&T Bank's Q3 Earnings, High Costs to Ail
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M&T Bank Corporation (MTB - Free Report) is slated to report third-quarter 2024 results on Oct. 17, before the opening bell. The company is expected to have registered year-over-year declines in quarterly revenues and earnings.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In the last reported quarter, M&T Bank’s results benefited from a rise in loans and leases and higher deposits. A decline in net interest income (NII), non-interest income and higher expenses were headwinds.
Quarterly earnings surpassed the consensus estimate in two of the trailing four quarters and missed twice, with an average negative earnings surprise of 0.25%.
Let us discuss the factors that are likely to have impacted the company’s quarterly performance.
Factors to Influence M&T Bank Q3 Performance
Loans & NII: The clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop are likely to have provided support to the lending scenario. Per the Fed’s latest data, the demand for commercial and industrial loans (C&I) and Consumer loans was modest in the first two months of the quarter while commercial real estate loan (CRE) was subdued.
MTB’s lending book is likely to have been positively impacted by improvements in commercial loans and Consumer loans while the subdued real estate loan demand might have offset growth to some extent.
Management noted that through August quarter-to-date (QTD), average loans were flat compared with second-quarter levels of $134.6 billion. The metric was driven by C&I and Consumer loans and continued reduction in CRE.
The improving lending scenario is likely to have supported average interest-earning assets growth during the third quarter. The Zacks Consensus Estimate for average interest-earning assets is pegged at $192.2 billion, suggesting a marginal increase from the prior quarter’s reported figure. Our model estimate is pegged at $197.6 billion.
On Sept. 18, the Federal Reserve cut interest rates by 50 basis points to 4.75-5% for the first time since March 2020. The development is not expected to have had much impact on MTB’s NII during the third quarter.
Also, relatively higher rates might have hurt NII growth prospects due to elevated funding/deposit costs and an inverted yield curve during the major part of the quarter.
Management projects an NII of $1.73 billion for the third quarter. The Zacks Consensus Estimate for NII (on a tax-equivalent basis) is pegged at $1.72 billion, suggesting a 0.2% decline from the prior quarter’s reported number. We estimate NII to be $1.73 billion.
Fee Income: Through August QTD, average total deposits were down to $160.7 billion from $163.5 billion in the second quarter of 2024. 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 $125.6 million, indicating a decline of 1.1% from the prior quarter's reported figure. Our estimate expects the metric to be $115.9 million.
As the central bank lowered the rates, mortgage rates started to come down. Rates declined to almost 6.2% by the end of the third quarter.
Though mortgage origination volume remained subdued during the third quarter, refinancing activities witnessed a significant surge supported by lower mortgage rates. This is likely to have supported MTB’s mortgage banking income.
The Zacks Consensus Estimate for mortgage banking is pegged at $108.5 million, indicating a 2.4% increase from the prior quarter’s reported figure. We expect the metric to be $100 million.
The Zacks Consensus Estimate for brokerage services income of $28.7 million suggests a decline of 4.4% from the second quarter of 2024 reported figure. We expect the metric to be $24.2 million.
The Zacks Consensus Estimate for trust income of $172.4 million suggests an increase of 1.4% from the second quarter of 2024 reported figure. Our model suggests the metric to be $164.9 million.
Management expects non-interest income in the range of $585-$600 million for the third quarter. The Zacks Consensus Estimate for the metric is pegged at $587.8 million for the quarter to be reported, indicating 0.6% growth from the prior quarter’s actual. Our model suggests the metric to be $554 million.
Expenses: The company's expenses are likely to have flared up in the to-be-reported quarter as it continues to invest in strengthening franchises. Management expects expenses in the range of $1.29-$1.32 billion for the third quarter. Our model projects the metric to be at the lower range of the management guidance.
What Our Quantitative Model Predicts for MTB
Per our proven model, the chances of M&T Bank beating estimates this time are high. 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 +0.33%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for MTB’s third-quarter earnings of $3.60 has been unchanged in the past seven days. The figure indicates a decline of 11.1% from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.30 billion, suggesting a decline of 1.4% from the prior-year reported level.
Stocks That Warrant a Look
Here are some other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post earnings beat this time around.
PNC’s quarterly earnings estimates have revised upward by 1.5% to $3.29 per share over the past month.
First Horizon Corporation (FHN - Free Report) has an Earnings ESP of +3.18% and carries a Zacks Rank #3 at present. The company is scheduled to release its third-quarter 2024 earnings on Oct. 16.
FHN’s quarterly earnings estimates have been unchanged at 38 cents over the past month.
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Decent Loan Demand to Aid M&T Bank's Q3 Earnings, High Costs to Ail
M&T Bank Corporation (MTB - Free Report) is slated to report third-quarter 2024 results on Oct. 17, before the opening bell. The company is expected to have registered year-over-year declines in quarterly revenues and earnings.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In the last reported quarter, M&T Bank’s results benefited from a rise in loans and leases and higher deposits. A decline in net interest income (NII), non-interest income and higher expenses were headwinds.
Quarterly earnings surpassed the consensus estimate in two of the trailing four quarters and missed twice, with an average negative earnings surprise of 0.25%.
M&T Bank Corporation Price and EPS Surprise
M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote
Let us discuss the factors that are likely to have impacted the company’s quarterly performance.
Factors to Influence M&T Bank Q3 Performance
Loans & NII: The clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop are likely to have provided support to the lending scenario. Per the Fed’s latest data, the demand for commercial and industrial loans (C&I) and Consumer loans was modest in the first two months of the quarter while commercial real estate loan (CRE) was subdued.
MTB’s lending book is likely to have been positively impacted by improvements in commercial loans and Consumer loans while the subdued real estate loan demand might have offset growth to some extent.
Management noted that through August quarter-to-date (QTD), average loans were flat compared with second-quarter levels of $134.6 billion. The metric was driven by C&I and Consumer loans and continued reduction in CRE.
The improving lending scenario is likely to have supported average interest-earning assets growth during the third quarter. The Zacks Consensus Estimate for average interest-earning assets is pegged at $192.2 billion, suggesting a marginal increase from the prior quarter’s reported figure. Our model estimate is pegged at $197.6 billion.
On Sept. 18, the Federal Reserve cut interest rates by 50 basis points to 4.75-5% for the first time since March 2020. The development is not expected to have had much impact on MTB’s NII during the third quarter.
Also, relatively higher rates might have hurt NII growth prospects due to elevated funding/deposit costs and an inverted yield curve during the major part of the quarter.
Management projects an NII of $1.73 billion for the third quarter. The Zacks Consensus Estimate for NII (on a tax-equivalent basis) is pegged at $1.72 billion, suggesting a 0.2% decline from the prior quarter’s reported number. We estimate NII to be $1.73 billion.
Fee Income: Through August QTD, average total deposits were down to $160.7 billion from $163.5 billion in the second quarter of 2024. 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 $125.6 million, indicating a decline of 1.1% from the prior quarter's reported figure. Our estimate expects the metric to be $115.9 million.
As the central bank lowered the rates, mortgage rates started to come down. Rates declined to almost 6.2% by the end of the third quarter.
Though mortgage origination volume remained subdued during the third quarter, refinancing activities witnessed a significant surge supported by lower mortgage rates. This is likely to have supported MTB’s mortgage banking income.
The Zacks Consensus Estimate for mortgage banking is pegged at $108.5 million, indicating a 2.4% increase from the prior quarter’s reported figure. We expect the metric to be $100 million.
The Zacks Consensus Estimate for brokerage services income of $28.7 million suggests a decline of 4.4% from the second quarter of 2024 reported figure. We expect the metric to be $24.2 million.
The Zacks Consensus Estimate for trust income of $172.4 million suggests an increase of 1.4% from the second quarter of 2024 reported figure. Our model suggests the metric to be $164.9 million.
Management expects non-interest income in the range of $585-$600 million for the third quarter. The Zacks Consensus Estimate for the metric is pegged at $587.8 million for the quarter to be reported, indicating 0.6% growth from the prior quarter’s actual. Our model suggests the metric to be $554 million.
Expenses: The company's expenses are likely to have flared up in the to-be-reported quarter as it continues to invest in strengthening franchises. Management expects expenses in the range of $1.29-$1.32 billion for the third quarter. Our model projects the metric to be at the lower range of the management guidance.
What Our Quantitative Model Predicts for MTB
Per our proven model, the chances of M&T Bank beating estimates this time are high. 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 +0.33%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for MTB’s third-quarter earnings of $3.60 has been unchanged in the past seven days. The figure indicates a decline of 11.1% from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.30 billion, suggesting a decline of 1.4% from the prior-year reported level.
Stocks That Warrant a Look
Here are some other bank stocks that you may want to consider, as our model shows that these, too, have the right combination of elements to post earnings beat this time around.
The Earnings ESP for PNC Financial (PNC - Free Report) is +0.89% and carries a Zacks Rank #3 at present. The company is slated to report quarterly results on Oct. 15. You can see the complete list of today’s Zacks #1 Rank stocks here.
PNC’s quarterly earnings estimates have revised upward by 1.5% to $3.29 per share over the past month.
First Horizon Corporation (FHN - Free Report) has an Earnings ESP of +3.18% and carries a Zacks Rank #3 at present. The company is scheduled to release its third-quarter 2024 earnings on Oct. 16.
FHN’s quarterly earnings estimates have been unchanged at 38 cents over the past month.