M&T Bank (MTB) Misses on Q3 Earnings, Revenues Up Y/Y

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M&T Bank Corporation 's MTB third-quarter 2015 earnings of $1.93 per share lagged the Zacks Consensus Estimate of $2.01. However, the reported figure increased 1% year over year.

Results were primarily affected by higher provisions, partially offset by revenue growth and lower expenses. The quarter witnessed continued growth in loan balances and exhibited a strong capital position.

On a non-GAAP basis, M&T Bank reported net operating income of $283 million or $1.95 per share, compared with $280 million or $1.94 per share in the prior-year quarter.

Quarter in Detail

M&T Bank recorded net revenues of $1.13 billion, which came below the Zacks Consensus Estimate of $1.15 billion. However, it compared favorably with the year-ago number of $1.12 billion.

M&T Bank's net interest income came in at $699 million, up 4% on a year-over-year basis. Net interest margin declined 9 basis points (bps) year over year to 3.14%

M&T Bank's other income declined 3% year over year to $440 million. The decrease was mainly due to lower income from several categories including mortgage banking income, trust fees and service charges on deposit accounts. However, the quarter experienced higher trading account and foreign exchange gains and other revenues.

Non-interest expenses were $654 million, down 2% from the prior-year quarter. Excluding certain non-operating items, expenses came in at $650 million, down 1% from the prior-year quarter. Notably, the reported quarter witnessed reduced costs for professional services, partially offset by increase in salaries and employee benefit expenses.

Loans and leases, net of unearned discount, rose 5% year over year to $68.5 billion at the end of the quarter. However, total deposits fell around 2% year over year to $72.9 billion.

M&T Bank's net operating income reflected an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.18% and 12.98%, respectively compared with 1.24% and 13.80% recorded in the prior-year quarter.

Credit Quality

Credit quality was a mixed bag in the reported quarter. Provision for credit losses increased 52% year over year to $ 44 million. Further, net charge-offs of loans came in at $40 million, up 43% year over year.

Net charge-offs as a percentage of average loans outstanding were 0.24%, up from 0.17% in the year-ago quarter.

However, the ratio of non-accrual loans to total net loans was 1.15%, down from 1.29% in the prior-year quarter. Further, non-performing assets decreased 7% year over year to $853 million.

Capital Position

M&T Bank's capital ratios were strong during the quarter. The company's estimated Common Equity Tier 1 to risk-weighted assets under the transitional capital rules effective on Jan 1, 2015 was around 10.08%. Tangible equity per share came in at $61.22, up 7% year over year.

Our Viewpoint

Following the financial crisis, the market witnessed a rise in the number of distressed banks ready to be taken over by their stronger counterparts. M&T Bank capitalized on such opportunities. In fact, strategic acquisitions have been a part of M&T Bank's business expansion policy. The long waited merger deal with Hudson City Bancorp, Inc. HCBK last month received the Federal Reserve's approval. The deal is expected to provide upside to M&T Bank's top line by leveraging Hudson City's retail network as well as product and balance sheet diversification.

We believe the company with a solid business model, sturdy capital position and strategic acquisitions is well poised for future growth. However, we remain cautious owing to regulatory issues and the low interest rate environment.

M&T Bank currently carries a Zacks Rank #3 (Hold).

Performance of Other Major Wall Street Firms

JPMorgan Chase & Co. JPM , which kick-started the third-quarter earnings season, missed the Zacks Consensus Estimate. The bank came up with adjusted earnings of $1.32 per share, delivering a negative surprise of 4.3%. The bottom line also declined 2.9% from the year-ago earnings of $1.36 per share. Weak trading activities primarily led to a decline in the overall profit for JPMorgan this time around. Revenues from trading fixed income, currencies and commodities fell 23%to $2.93 billion.

Driven by top-line growth, Wells Fargo & Company's WFC earnings of $1.05 per share in third-quarter 2015 beat the Zacks Consensus Estimate by a penny. Moreover, results were above the year-ago quarter earnings of $1.02 per share. The company reflected organic growth aided by higher revenues along with strong loans and deposit balances. Moreover, a strong capital position and returns on assets and equity acted as the positives. However, higher non-interest expenses and provisions were a concern.

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M&T BANK CORP (MTB): Free Stock Analysis Report

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

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

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