M&T Bank Corporation
) third-quarter 2013 operating earnings of $2.16 per share beat
the Zacks Consensus Estimate of $2.08. However, this was down 4%
from $2.24 earned in the prior-year quarter.
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Better-than-expected earnings were primarily aided by rise in
both net interest income and non-interest income. Moreover, an
improvement in capital ratios was a positive. However, a rise in
expenses was the headwind.
On a GAAP basis, M&T Bank reported net income of $294 million
or $2.11 per share, compared with $293 million or $2.17 per share
in the prior-year quarter. Results for both the quarters include
amortization of core deposit and other intangible assets.
Quarter in Detail
M&T Bank's total revenue was recorded at $1.2 billion, almost
in line with the prior-year quarter.
M&T Bank's net interest income came in at $673 million, up 2%
year over year. Further, net interest margin declined to 3.61%
from 3.77% in the prior-year quarter.
M&T Bank's other income increased 7% year over year to $477
million, due to higher trust income, partly offset by decrease in
residential and commercial mortgage banking revenues.
M&T Bank's non-interest expense was $659 million, up 7% from
the prior-year quarter. Excluding amortization of core deposit
and other intangible assets as well as merger-related expenses,
non-interest operating expenses came in at $648 million, up 8%
from the prior-year quarter. The rise in non-interest operating
expenses in the said quarter was mainly due to increase in costs
for salaries and professional services.
Efficiency ratio declined to 56.0% from 53.7% in the prior-year
Loans and leases, net of unearned discount, dropped 0.6% year
over year to $63.7 billion at the end of the reported quarter.
However, total deposits rose 4% year over year to $66.6 billion
as of Sep 30, 2013 from $64.0 billion at the prior year
M&T Bank's net operating income reflected an annualized rate
of return on average tangible assets and average tangible common
shareholder equity of 1.48% and 17.64%, respectively, compared
with 1.56% and 21.53% recorded in the prior-year quarter.
Credit quality was a mixed bag at M&T Bank. Provision for
credit losses increased 4% year over year to $48 million. The
provision was equal to net charge-offs in the third quarter of
2013, and exceeded net charge-offs in the third quarter of 2012
by $4 million. Net charge-offs, as a percentage of average loans
outstanding were 0.29%, up from 0.26% in the year-ago quarter.
However, the ratio of non-accrual loans to total net loans
remained stable at 1.44% year over year.
M&T Bank's tangible common equity to tangible assets ratio
was 8.11% as of Sep 30, 2013, improving from 7.04% as of Sep 30,
2012. The company's Tier 1 common ratio was 9.07% as of Sep 30,
2013, compared with 7.46% as of Sep 30, 2012.
Performance of Other Banks
Among other major regional banks,
The PNC Financial Services Group, Inc.
) third-quarter 2013 earnings per share of $1.79 outpaced the
Zacks Consensus Estimate of $1.61. Better-than-expected results
were primarily driven by decrease in both operating expenses and
provision for credit losses.
) reported third-quarter 2013 earnings per share of 78 cents,
beating the Zacks Consensus Estimate of 71 cents and above 76
cents earned in the prior quarter. Comerica's results came on the
back of increased non-interest income and lower provisions for
The company, with its solid business model and strategic
acquisitions, is well poised for growth. While the sluggish
economic recovery, regulatory issues and low interest rate
environment remain headwinds for M&T Bank, we believe that
its sound capital position and growing core deposit bode well in
the long run.
In Aug 2012, M&T agreed to take over
Hudson City Bancorp Inc.
) in a cash and stock deal worth $3.7 billion, based on M&T
Bank's closing stock price on Aug 24, 2012. However, in Apr 2013,
the Federal Reserve detected several loopholes in M&T Bank's
efforts to fight money laundering and put a hold on the
Nevertheless, in Jun 2013, the bank successfully reached an
agreement with the Fed to improve compliance with respect to
risky activities. Hence, it has managed to overcome all
M&T Bank currently carries a Zacks Rank #3 (Hold).