M&T Bank Outperforms, Revenue Upped - Analyst Blog

By
A A A
Share |

M&T Bank Corporation 's ( MTB ) third quarter 2012 operating earnings of $2.24 per share were significantly above the Zacks Consensus Estimate of $1.84. In addition, it surpassed the prior-quarter earnings of $1.82 per share.

The results were aided by bolstered net interest and non-interest income as well as lower operating expenses. Mortgage banking revenues posted a decent rise in the quarter. Moreover, improved capital ratios reflected the company's strong capital position and enhanced credit quality was a tailwind for the quarter.

On a GAAP basis, M&T Bank reported net income of $293 million or $2.17 per share, escalating from $233 million or $1.71 per share in the prior quarter. Results of the reported quarter included a number of special items, such as the impact of amortization of core deposit and other intangible assets as well as merger-related gains and expenses.

Quarter in Detail

M&T Bank's total revenue was recorded at $1.2 billion, up 9.1% from the previous quarter. Moreover, revenue results also surpassed the Zacks Consensus Estimate of $1.1 billion.

M&T Bank's net interest income came in at $669 million, up 2.1% from the previous quarter. The improvement was primarily due to increase in average earning assets. The growth also stems from a hike in the net interest margin, which improved to 3.77% from 3.74% in the prior quarter.

M&T Bank's non-interest income elevated 13.8% sequentially to $446 million and included pre-tax losses on investment securities. Excluding gains and losses from investment securities, non-interest income came in at $451 million, exhibiting an improvement of 10.5% from $408 million, reported in the last quarter. The sequential hike was primarily attributable to higher mortgage banking revenues.

M&T Bank's non-interest expense was $616 million, down 1.8% from the prior quarter. Excluding non-operating expenses and other merger-related costs, non-interest operating expenses came in at $602 million, down 0.3% from the prior quarter. The sequential decline primarily reflected the continued realization of synergies from the integration of the operations from Wilmington Trust Corporation. Efficiency ratio improved to 53.7% from 56.9% in the previous quarter.

Loans and leases, net of unearned discount, were $64.1 billion at the end of the third quarter, up 1.9% sequentially from $62.9 billion. Total deposits increased 2.4% sequentially to $64.0 billion as of September 30, 2012 from $62.5 billion at the end of the prior quarter.

Credit quality reflected an improvement during the quarter under review. Provision for credit losses declined 23.3% to $46 million and net charge-offs dipped 19.2% to $42 million. Net charge-offs, as a percentage of average loans outstanding, were 0.26%, down from 0.34% in the preceding quarter. Moreover, the ratio of non-accrual loans to total net loans moved down to 1.44% from 1.54% in the previous quarter.

M&T Bank's net operating income, expressed as an annualized rate of return on average tangible assets, and average tangible common shareholders' equity was 1.56% and 21.53%, respectively, compared with 1.30% and 18.54% recorded in the earlier quarter.

M&T Bank's tangible common equity to tangible assets ratio was 7.04% as of September 30, 2012, improving from 6.65% as of June 30, 2012. The company's Tier 1 common ratio stood at 7.47% as of September 30, 2012 compared with 7.15% as of June 30, 2012.

Acquisition

Recently, M&T agreed to takeover Hudson City Bancorp Inc. ( HCBK ) in cash and stock deal worth $3.7 billion, based on M&T's closing stock price on August 24, 2012. The bank deal, the largest this year, would lead to an expansion of M&T Bank's franchise in the eastern U.S. and give it the fourth largest deposit share in New Jersey. Under the terms of the agreement, M&T will gain Hudson City's 135 branch offices sited at New Jersey, New York and Connecticut, which will lead to a combined network of 870 branches ranging from Connecticut to Virginia.

Our Viewpoint

With a solid business model and strategic acquisitions, the company is well poised for future growth. While the sluggish economic recovery, regulatory issues and low interest rates remain the headwinds for M&T Bank, we believe that a sound capital position, along with a growing core deposit, will uphold it in the long run.

M&T Bank currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain our long-term 'Neutral' recommendation on the stock.

Among M&T Bank's peers, KeyCorp ( KEY ) and Fifth Third Bancorp ( FITB ) are scheduled to announce their third quarter 2012 results on October 18.


 
FIFTH THIRD BK (FITB): Free Stock Analysis Report
 
HUDSON CITY BCP (HCBK): Free Stock Analysis Report
 
KEYCORP NEW (KEY): Free Stock Analysis Report
 
M&T BANK CORP (MTB): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: FITB , HCBK , KEY , MTB

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

152,099,280
  • $16.13 ▼ 1.59%
76,450,549
  • $59.72 ▲ 1.07%
57,375,391
  • $36.35 ▲ 6.26%
50,140,425
  • $26.93 ▲ 0.60%
49,201,544
  • $3.17 ▲ 2.59%
39,533,031
  • $86.18 ▲ 1.33%
36,760,050
  • $13.42 ▲ 2.84%
33,109,047
  • $26.12 ▲ 1.16%
As of 4/16/2014, 04:05 PM