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M&T Bank (MTB) Lags Q3 Earnings Estimates, Revenues Rise
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M&T Bank Corporation’s (MTB - Free Report) reported third-quarter 2017 net operating earnings of $2.24 per share which lagged the Zacks Consensus Estimate $2.40. However, it increased 5.2% on a year-over-year basis.
Third-quarter results reflected fall in other income and higher expenses. Eased margin pressure and a solid capital position were the positives. Fall in provisions for credit losses was another tailwind.
Net operating income came in at $361 million, up around 1.4% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $2.21 also jumped 5% year over year. Net income climbed 1.7% to $356 million.
Fall in Fee Income and Higher Costs More Than Offset Rise in Interest Income
M&T Bank’s revenues came in at $1.42billion, lagging the Zacks Consensus Estimate of $1.43billion. However, it compared favorably with the year-ago quarter figure of $1.35 billion.
Taxable-equivalent net interest income increased 11.7% year over year to $966 million in the quarter. Further, net interest margin expanded48 basis points (bps) to 3.53%.
The company’s other income declined 6% year over year to $459 million due to lower trading account and foreign exchange gains, mortgage banking revenues and absence of gain on bank investment securities.
Non-interest expenses were $806 million, up 7% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $798 million, up 7.4% from the year-ago quarter. The rise was driven by increased outside data processing and software expenses along with other costs.
Efficiency ratio increased slightly to 56% from 55.9% in the prior-year quarter. Generally, a rise in ratio indicates decline in efficiency.
Loans and leases, net of unearned discount, decreased 1.3%from prior quarterto $87.9 billion at the end of the third quarter. Moreover, total deposits were flat sequentially at $93.5 billion.
M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.25% and 13.03%, respectively, compared with 1.18% and 12.77% in the prior-year quarter.
Credit Quality: A Mixed Bag
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses declined 36% year over year to $30 million. Net charge-offs of loans came in at $25 million, down 39% year over year. Further, non-performing assets decreased 2% to $980 million.
However, the ratio of non-accrual loans to total net loans was 0.99%, up from 0.93% in the prior-year quarter. Additionally, allowance for credit losses to total loans was 1.15%, up 6 bpsfrom the year-ago quarter.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.98%. Tangible equity per share came in at $69.02, up 2.4% year over year.
Share Repurchase
During the third quarter, the company repurchased 1.4 million shares of common stock for a total cost of $225 million at an average cost per share of $162.52.
Our Viewpoint
M&T Bank’s eased margin pressure supported the rise in net interest income. We believe that the company, with its solid business model and strategic acquisitions, is well poised for growth. However, declining fee income creates pressure on its topline.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 7.6% in third-quarter 2017 on prudent expense management. Earnings per share of $1.42 for the quarter easily outpaced the Zacks Consensus Estimate of $1.32. Also, earnings compared favorably with the year-ago figure of $1.24 per share. Notably, results included after-tax gain related to the sale of a fixed income analytics business.
Wells Fargo & Company’s (WFC - Free Report) third-quarter 2017 adjusted earnings of $1.04 per share were in line with the Zacks Consensus Estimate. Including previously disclosed mortgage-related discrete litigation accrual of 20 cents per share, earnings came in at 84 cents per share, comparing unfavorably with the prior-year quarter’s earnings of $1.03 per share.
JPMorgan Chase & Co. (JPM - Free Report) reported third-quarter 2017 earnings of $1.76 per share, which easily surpassed the Zacks Consensus Estimate of $1.67. Also, the figure reflects a 11% rise from the year-ago period. Notably, the results included a legal benefit of $107 million.
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M&T Bank (MTB) Lags Q3 Earnings Estimates, Revenues Rise
M&T Bank Corporation’s (MTB - Free Report) reported third-quarter 2017 net operating earnings of $2.24 per share which lagged the Zacks Consensus Estimate $2.40. However, it increased 5.2% on a year-over-year basis.
Third-quarter results reflected fall in other income and higher expenses. Eased margin pressure and a solid capital position were the positives. Fall in provisions for credit losses was another tailwind.
Net operating income came in at $361 million, up around 1.4% year over year.
On a GAAP basis, M&T Bank’s earnings per share of $2.21 also jumped 5% year over year. Net income climbed 1.7% to $356 million.
Fall in Fee Income and Higher Costs More Than Offset Rise in Interest Income
M&T Bank’s revenues came in at $1.42billion, lagging the Zacks Consensus Estimate of $1.43billion. However, it compared favorably with the year-ago quarter figure of $1.35 billion.
Taxable-equivalent net interest income increased 11.7% year over year to $966 million in the quarter. Further, net interest margin expanded48 basis points (bps) to 3.53%.
The company’s other income declined 6% year over year to $459 million due to lower trading account and foreign exchange gains, mortgage banking revenues and absence of gain on bank investment securities.
Non-interest expenses were $806 million, up 7% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses came in at $798 million, up 7.4% from the year-ago quarter. The rise was driven by increased outside data processing and software expenses along with other costs.
Efficiency ratio increased slightly to 56% from 55.9% in the prior-year quarter. Generally, a rise in ratio indicates decline in efficiency.
Loans and leases, net of unearned discount, decreased 1.3%from prior quarterto $87.9 billion at the end of the third quarter. Moreover, total deposits were flat sequentially at $93.5 billion.
M&T Bank's net operating income highlighted an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.25% and 13.03%, respectively, compared with 1.18% and 12.77% in the prior-year quarter.
Credit Quality: A Mixed Bag
M&T Bank reflected a mixed credit quality in the reported quarter. Provision for credit losses declined 36% year over year to $30 million. Net charge-offs of loans came in at $25 million, down 39% year over year. Further, non-performing assets decreased 2% to $980 million.
However, the ratio of non-accrual loans to total net loans was 0.99%, up from 0.93% in the prior-year quarter. Additionally, allowance for credit losses to total loans was 1.15%, up 6 bpsfrom the year-ago quarter.
Strong Capital Position
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules was around 10.98%. Tangible equity per share came in at $69.02, up 2.4% year over year.
Share Repurchase
During the third quarter, the company repurchased 1.4 million shares of common stock for a total cost of $225 million at an average cost per share of $162.52.
Our Viewpoint
M&T Bank’s eased margin pressure supported the rise in net interest income. We believe that the company, with its solid business model and strategic acquisitions, is well poised for growth. However, declining fee income creates pressure on its topline.
M&T Bank Corporation Price and EPS Surprise
M&T Bank Corporation Price and EPS Surprise | M&T Bank Corporation Quote
Currently, M&T Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 7.6% in third-quarter 2017 on prudent expense management. Earnings per share of $1.42 for the quarter easily outpaced the Zacks Consensus Estimate of $1.32. Also, earnings compared favorably with the year-ago figure of $1.24 per share. Notably, results included after-tax gain related to the sale of a fixed income analytics business.
Wells Fargo & Company’s (WFC - Free Report) third-quarter 2017 adjusted earnings of $1.04 per share were in line with the Zacks Consensus Estimate. Including previously disclosed mortgage-related discrete litigation accrual of 20 cents per share, earnings came in at 84 cents per share, comparing unfavorably with the prior-year quarter’s earnings of $1.03 per share.
JPMorgan Chase & Co. (JPM - Free Report) reported third-quarter 2017 earnings of $1.76 per share, which easily surpassed the Zacks Consensus Estimate of $1.67. Also, the figure reflects a 11% rise from the year-ago period. Notably, the results included a legal benefit of $107 million.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>