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Will Fee Income Aid M&T Bank (MTB) Q3 Earnings Amid Low Rates?

M&T Bank Corporation MTB is scheduled to report third-quarter 2020 results on Oct 22, before the bell. The company’s revenues and earnings will likely reflect year-over-year declines.

M&T Bank reported a negative earnings surprise of 7.9% in the second quarter. The company’s results were adversely impacted by a substantial rise in provisions related to the adoption of the accounting method of Current Expected Credit Losses and the coronavirus crisis. Moreover, revenues disappointed on low rates and decline in fee income. However, prudent expense management was visible.

Notably, M&T Bank has a decent earnings surprise history, having surpassed estimates in two of the trailing four quarters for as many misses, the average beat being 4.46%.

 

MT Bank Corporation Price and EPS Surprise MT Bank Corporation Price and EPS Surprise

MT Bank Corporation price-eps-surprise | MT Bank Corporation Quote

Key Factors

Muted Net Interest Income (NII): The overall lending scenario was decent during the July-September quarter, with commercial and industrial, along with real estate loan portfolios having offered significant support. Conversely, as consumer sentiment dipped amid the coronavirus crisis, demand for consumer loans was hit hard.

With the central bank cutting interest rates to near zero in March to support the U.S. economy, M&T Bank’s net interest margin and NII are likely to have been affected. Nevertheless, low deposit costs and higher average interest earning assets might have been offsetting factors.

The Zacks Consensus Estimate of $116.8 billion for the third-quarter average interest earning assets suggests a 14.2% rise from the prior-year quarter.

Per the consensus estimate, overall NII is expected to fall 6.8% to $965 million on a year-over-year basis.

Impressive Fee Income Growth: The company is anticipated to have witnessed growth in trust revenues on strong equity markets during the to-be-reported quarter. Further, given the lower mortgage rates, M&T Bank is likely to have witnessed an improvement in mortgage loan refinancing activity, in turn boosting fee income. The Zacks Consensus Estimate of $139 million for mortgage banking income calls for a 1.5% year-over-year improvement during the quarter under review.

Also, the bank is likely to have registered a rise in service charge on deposits, as the deposit balance is expected to have increased. Thus, overall growth in other income is projected for the quarter to be reported.

Controlled Expenses: While the absence of considerable legal expenses is encouraging, increased investments in technology to improve digital offerings might have escalated costs to an extent.

Here is what our quantitative model predicts:

M&T Bank does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for M&T Bank is 0.00%.

Zacks Rank: M&T Bank currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.

The Zacks Consensus Estimate of $2.66 for quarterly earnings calls for a 23.3% decline on a year-over-year basis. Furthermore, the sales projection of $1.46 billion suggests a 6.1% decline, year over year.

Banks Worth a Look

Here are a few 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:

The Earnings ESP for CullenFrost Bankers, Inc. CFR is +2.61% and the stock carries a Zacks Rank of 3, at present. The company is slated to report third-quarter numbers on Oct 29. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huntington Bancshares Incorporated HBAN is set to release earnings figures on Oct 22. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +3.47%.

BankUnited, Inc. BKU is scheduled to announce quarterly results on Oct 28. The company has an Earnings ESP of +13.29% and currently carries a Zacks Rank of 3.

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MT Bank Corporation (MTB): Free Stock Analysis Report
 
Huntington Bancshares Incorporated (HBAN): Free Stock Analysis Report
 
BankUnited, Inc. (BKU): Free Stock Analysis Report
 
CullenFrost Bankers, Inc. (CFR): 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.

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