M&T Bank CorporationMTB is slated to report first-quarter 2024 results on Apr 15, before the opening bell. The company is expected to have witnessed year-over-year declines in quarterly revenues and earnings. In the last reported quarter, M&T Bank 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. MTB’s earnings surpassed the consensus estimate in three of the trailing four quarters and missed in the other, the surprise being 1.67%, on average. M&T Bank Corporation Price and EPS Surprise M&T Bank Corporation price-eps-surprise | M&T Bank Corporation Quote The company’s business activities and prospects in the to-be-reported quarter have not encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for MTB’sfirst-quarter earningsof $3.12 has been revised marginally downward over the past seven days. The figure indicates a decline of 23.7% from the year-ago reported number. The consensus estimate for revenues is pegged at $2.26 billion, which suggests a decrease of 6.2% 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 likely to have impacted the company’s quarterly performance. Key Factors & Estimates for Q1
Loans & NII:The demand for commercial and industrial loans, and real estate loans, specifically commercial real estate loans, improved from the fourth-quarter 2023 end, per the Fed’s latestdata. Moreover, consumer lending showed signs of improvement. The stabilizing macroeconomic backdrop, along with the expectations of the Fed easing interest rates going forward, is likely to have offered support to the improving lending scenario in the quarter. Hence, we expect loan growth for M&T Bank to have been decent, given its exposure to commercial and commercial real estate loans.
Management noted that through February 2024, average loans increased $0.8 billion from fourth-quarter 2023 to $133.5 billion, backed by commercial and industrial loans, as well as consumer loans.
This is likely to have positively impacted average interest-earning assets in the quarter. Notably, the Zacks Consensus Estimate for average interest-earning assets is pegged at $190.5 billion, suggesting a marginal increase from the prior quarter’s reported figure.
Also, while the Fed paused interest rate hikes in first-quarter 2024, interest rates remained at a 22-year high of 5.25-5.5%. Amid the high interest rate environment, an inverted yield curve, and higher deposit and wholesale funding costs are anticipated to have negatively impacted NII in the quarter to be reported.
Management projects NII of $1.68-$1.70 billion. The Zacks Consensus Estimate for NII (on a tax-equivalent basis) of $1.67 billion suggests a 2.6% decrease from the prior quarter’s reported number. We estimate the metric to be $1.69 billion. Also, management expects the net interest margin to be 3.50%.
Fee Income: Through February, average total deposits declined $1.3 billion from fourth-quarter 2023 to $163.4 billion due to a decline in brokered 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 $118 million, indicating a sequential fall of 2.48%.
In the first quarter, mortgage rates increased, with the rate on a 30-year fixed mortgage rising to 6.79% in March from 6.62% at the start of January. Nonetheless, due to home price appreciation, origination volumes (particularly purchase originations) were lower than in the prior quarter.
These factors are expected to have lowered M&T Bank’s mortgage banking revenues in the quarter under discussion. The Zacks Consensus Estimate is pegged at $108 million, indicating a 3.5% decrease from the prior quarter’s reported figure.
The Zacks Consensus Estimate for brokerage services income of $25.6 million suggests a 1.5% decline from the fourth-quarter 2023 reported figure. Our estimate for the metric is pegged at $23.2 million.
The planned Bayview distribution of $20 million is expected to aid fee income.
Overall, management expects non-interest income of $575-$590 million. We forecast the same to be $560.4 million in the quarter, indicating a year-over-year decline of 4.5%.
Expenses: The company’s escalating expense base is expected to have impeded bottom-line growth in the first quarter. Management expects expenses of $1.365-$1.380 billion. This includes $100-$105 million in seasonally higher compensation expenses.
What Our Quantitative Model Predicts
Our proven model does not predict an earnings beat for M&T Bank this time around. The combination of a positiveEarnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with ourEarnings ESP Filter.
Earnings ESP: The Earnings ESP for M&T Bank is -1.06%.
Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Truist FinancialTFC is scheduled to release first-quarter 2024 earnings on Apr 22. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.83%.
TFC’s quarterly earnings estimates have been unchanged at 78 cents over the past month.
Fifth Third BancorpFITB is scheduled to release first-quarter 2024 earnings on Apr 19. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.89%. You can seethe complete list of today’s Zacks #1 Rank stocks here.
FITB’s quarterly earnings estimates have been marginally revised upward over the past week.
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