Raising Our Fair Value for M&T Bank to $169 After First-Quarter Earnings

Strategist

Eric Compton

Revenue segments as reported by the company.

Interest income

Interest expense

Revenue Segments

Revenue is the money generated from normal business operations. Gross Profit is revenue minus cost of goods sold. Operating Income is revenue minus cost of goods sold and other operating expenses.

Revenue

Operating Income

Revenue & Operating Income

Net Income, also called net earnings, is calculated as revenue minus cost of goods sold, operating expenses, depreciation, interest, taxes, and other expenses.

Net Income

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Provision for credit losses

Other income

Other expense

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank's main stronghold is its commercial real estate operations, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

MTB acquired People's United Bank in April 2022. This move has further expanded M&T's geographical reach in the Northeast, primarily into Connecticut along with Massachusetts and the New York City area. The acquisition expanded the bank's equipment financing-related product offerings. We liked the pricing of the deal and expect that cost savings alone will justify the acquisition. With merger related expenses set to drop to essentially zero in 2023, we're about to get a good look at the true expense run rate for the combined entity. After this, it will be up to the bank to drive additional revenue growth as new commercial products are cross-sold into newer geographies and as M&T also potentially picks up some new retail customers along the way.

The bank has also recently sold off its insurance brokerage unit and is planning to sell off a portion of its fund administration business, a move that we think make some sense in what are consolidating industries.

MTB, like many regional banks, derives a majority (roughly two thirds) of its income from net interest income. As such, the bank's earnings are sensitive to movements in interest rates. The remaining one third of revenue comes from different fee sources, including wealth management, deposit service fees, and mortgage fees.

MTB has one of the largest CRE exposures under our coverage; this is once again coming under increased scrutiny. While certain CRE assets (now office properties) have come under unique pressure, M&T's underwriting remains solid, and while losses have occurred, they have been very manageable. Going forward, M&T's ability to deal with a slowing NYC CRE market and grow out additional revenue from its recent acquisition will be important.

Business Strategy & Outlook

We believe M&T Bank has earned a narrow moat because it possesses durable cost advantages and switching costs that are consistent with our bank moat framework. Spread-earning banks generally earn moats by paying less interest on deposits, controlling noninterest expenses, and/or managing credit costs better than their peers. These factors lead banks with moats to have durably higher returns on equity than their cost of capital. We also consider the strength of fee-based income streams and overall scale and product scope when we think about competitive positioning for our banking coverage. We assign a 9% cost of equity for all U.S. regional banks and project M&T Bank to easily exceed this hurdle with returns on tangible common equity averaging 15% over our forecast period. Our analysis shows that M&T Bank has built a narrow moat through durable controls in its deposit costs, operating expenditures, and credit costs.

M&T Bank’s low-cost deposit base gives the company a deposit cost advantage, and the bank's strong relationships with customers result in switching costs. Evidence shows MTB retains higher proportions of non-interest-bearing deposits in a variety of interest-rate environments. Further, the bank has a number of strong commercial relationships where deposit pricing can be made in the context of the total relationship. Both of these factors lead us to expect MTB will maintain its durably lower interest costs relative to total deposits.

M&T Bank has historically had strong operating efficiency, which bolsters its narrow moat. M&T’s efficiency is demonstrated through the efficiency ratio, which has consistently been below 60% in most environments. While its costs have risen faster than peers' in the recent past, we believe M&T will continue managing noninterest costs effectively enough and expect that its efficiency will remain within the same range as narrow-moat peers'. We think that the relatively low noninterest expense is a function of the company’s scale and concentration of deposits (nearly 90% of deposits are in MTB’s top 10 metropolitan statistical areas) since noninterest expenses do not scale with deposits. Given its regional focus, we do not expect MTB to seek deposit growth in unproductive areas outside its region.

M&T Bank adds to its moat by underwriting quality loans, thereby controlling credit costs. MTB has one of the best underwriting histories under our coverage and has consistently outperformed peers through multiple downturns. MTB controlled its charge-offs relative to average loans quite well during the financial crisis, even though about half of its loans were exposed to real estate in 2008. MTB’s credit cost advantage is based on the company’s well-established focus on risk-adjusted yield, which was set in place by the late longtime CEO Robert Wilmers. We do not expect this credit culture to change. We will admit that many of M&T's peers have improved in underwriting quality since 2008, and these costs do not tend to be true differentiators except in a serious downturn, so this advantage may be smaller going forward.

From a systemic standpoint, we believe the U.S. banking system has improved over the last decade, as capital levels supporting the banking system are at all-time highs. Further, regulation has become considerably stronger in the past several years. The U.S. banking market is quite fragmented, and MTB must compete with a variety of regional and community banks as well as large money center institutions, although this fragmentation has gradually decreased since the 1990s. While we do view the banking sector as intensely competitive, the largest banks by asset size have generally been able to earn higher returns on equity for the last several decades and still do so today. Our outlook is generally positive from a macroeconomic and political standpoint for the U.S. banking system, as the U.S. is still the world's leading democracy, has increased GDP at a steady pace for years, and maintains the world's reserve currency, all of which contribute to banking stability.

With updated banking regulations, MTB is now considered a Category IV bank, and its regulatory burden has been reduced. Currently, the bank is only subject to biennial stress tests by the U.S. Federal Reserve, is not subject to any leverage ratio requirements, and is also free from more stringent liquidity requirements. The bank must pass $250 billion in assets before triggering additional regulatory requirements.

Narrow

Economic Moat

M&T Bank

Wilmington Trust, based in Paramus, in the U.S. state of New Jersey, was a bank-holding company for Hudson City Savings Bank, its only subsidiary, then the largest savings bank in New Jersey and one of the oldest banks in the United States, with US$50 billion in assets. It is now a fully publicly held entity and a member S&P 500 stock market Index. In 2005, its US$3.93 billion secondary offering of common stock was the largest in United States banking history. At the time, it was also the seventh largest domestic public offering in United States history. wz The bank avoided the excesses of the housing boom and was labeled "best bank of 2007" by Forbes. M&T Bank agreed to acquire Hudson City on August 27, 2012.

Wilmington Trust

Hudson City Bancorp was a bank-holding company for Hudson City Savings Bank, its only subsidiary, then the largest savings bank in New Jersey and one of the oldest banks in the United States, with US$50 billion in assets. It is now a fully publicly held entity and a member S&P 500 stock market Index. In 2005, its US$3.93 billion secondary offering of common stock was the largest in United States banking history. At the time, it was also the seventh largest domestic public offering in United States history. The bank avoided the excesses of the housing boom and was labeled "best bank of 2007" by Forbes. M&T Bank agreed to acquire Hudson City on August 27, 2012.

Hudson City Bancorp

M&T Bank Corp. operates as a bank holding company, which engages in the provision of retail and commercial banking, trust, wealth management and investment services. It operates through the following segments: Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking, and Retail Banking. The Business Banking segment provides services to small businesses and professionals through the company's branch network, business banking centers, and other delivery channels such as telephone banking, Internet banking and automated teller machines. The Commercial Banking segment offers credit products and banking services for middle-market and large commercial customers. The Commercial Real Estate segment includes credit and deposit services to its customers. The Discretionary Portfolio segment consists of investment and trading securities, residential mortgage loans and other assets, short-term and long-term borrowed funds, brokered certificates of deposit and interest rate swap agreements related thereto, and Cayman Islands branch deposits. The Residential Mortgage Banking segment consists of residential mortgage loans and sells substantially all of those loans in the secondary market to investors. The Retail Banking segment offers services to consumers through several delivery channels which include branch offices, automated teller machines, telephone banking, and Internet banking. The company was founded on August 30, 1856, and is headquartered in Buffalo, NY.

Earnings data Q2 2023

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

M&T Bank Corp beat Wall Street estimates for first-quarter profit on Monday, as the U.S. Federal Reserve's rapid rate hikes to tame high inflation boosted the lender's interest income.

M&T Bank Corp beats profit estimates as interest income doubles

BUFFALO, N.Y. , April 17, 2023 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) today reported its results of operations for the quarter ended March 31, 2023.

M&T BANK CORPORATION ANNOUNCES FIRST QUARTER RESULTS

BOK Financial

Cullen/Frost Bankers

Comerica

First Financial Bancorp

First Interstate BancSystem

F.N.B. Corp.

JPMorgan Chase & Co

SPDR S&P Bank ETF

PNC Financial Services

Trustmark

Washington Federal

Wells Fargo

WSFS Financial

What banking crisis? For some banks, profits are booming.

10 Banks Are Raking It In As Their Profits Soar, Analysts Say

M&T Bank has a stronger deposit franchise than many of its peers, with less reliance on large uninsured deposits, more "Main Street" depositors, and lower than average deposit costs. Credit quality in the CRE portfolio is likely to be a key watch item given M&T's above-average exposure, and particularly so in the office portfolio.

M&T Bank Looks Like A Relative Safe Haven In A Very Nervous Market

The decent increase in loan balances, along with higher interest rates, are likely to support M&T Bank's (MTB) Q1 net interest income. Yet, expenses are expected to rise, limiting bottom-line growth.

NII to Support M&T Bank's (MTB) Q1 Earnings, Expenses to Hurt

Charles Schwab

System1, Inc

In the first half hour of Thursday's regular session, the Dow Jones industrials traded up 0.02%, the S&P 500 up 0.28% and the Nasdaq 0.87% higher.

Earnings Previews: Charles Schwab, M&T Bank, State Street

Banco Bradesco

Bank of Montreal

MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN

MicroSectors U.S. Big Banks Index 3X Leveraged ETN

Bank of Nova Scotia

Canadian Imperial Bank of Commerce

Davis Select Financial ETF

iShares MSCI Europe Financials ETF

Fifth Third Bancorp

First Trust Nasdaq Bank ETF

Huntington Bancshares

HSBC Holdings

iShares U.S. Regional Banks ETF

iShares Global Financials ETF

Invesco KBW Bank ETF

Invesco KBW Regional Banking ETF

KeyCorp

SPDR S&P Regional Banking ETF

First Trust NASDAQ ABA Community Bank Index Fund

Royal Bank of Canada

SVB Financial Group

One month ago, Silicon Valley Bank failed, with a resulting decline across the diversified banking industry. Some investors may be tempted to buy the dip, while others are considering doubling down on losing positions.

Banks Are On Sale But Risks Remain

M&T Bank Corporation (MTB) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

M&T Bank Corporation (MTB) Reports Next Week: Wall Street Expects Earnings Growth

BancFirst

Citigroup

Fears over the banking crisis and customers' ability to earn more yield on safer assets have made retaining deposits very difficult for banks. Banks that lose lots of deposits will see their earnings struggle.

5 Bank Stocks That Can Navigate the Challenging Deposit Environment Right Now

Seven-week business accelerator program to be held at Harrisburg University, beginning May 10 HARRISBURG, Pa. , April 4, 2023 /PRNewswire/ -- M&T Bank (NYSE: MTB) is seeking as many as 50 entrepreneurs to participate in its second annual Capital Region Multicultural Small Business Lab – a program designed to provide multicultural business owners with the guidance and skills needed to build strong businesses, spur economic growth in the Harrisburg area and build generational wealth for their families.

M&T Bank Launches Second Annual Multicultural Small Business Lab for Greater Harrisburg Entrepreneurs

Bank of America

Citizens Financial Group

U.S. Bancorp

Office loans are of big concern because the shift to remote work pushed up office vacancy rates and lowered demand. Analysts say banks could experience high loss rates in their office portfolios.

Are the Largest U.S. Banks Prepared for Stress in Their Office Loan Portfolios?

Regional banks have been crushed by the Silicon Valley Bank fallout. M&T Bank is one of the safer choices in this space, and valuations are reasonable.

M&T Bank: Conservative Bank's Valuation At GFC And COVID Lows

M&T Bank has been pressured by the same issues as the sector at large. Considered a regional bank, the company will likely see a bit more deposit outflows here as well.

M&T Bank: Banking Concerns

Dime Community Bank

Flushing Financial

National Bankshares

Simmons First National Corporation

A new year comes with new challenges. On top of the existing uncertainty related to inflation, interest rates and geopolitical turmoil, the recent collapse of SVB Financial Group's ( SIVBQ , Financial) Silicon Valley Bank and Signature Bank ( SBNY , Financial) have caused many investors to seek some stability within their portfolios.

5 Historically High-Yielding Bank Stocks Gurus Like

I've noticed some analysts pointing to similarities between 2008 and the current banking crisis. Despite yesterday's news that First Citizens BancShares ( FCNCA , Financial) is buying part of Silicon Valley Bank ( SIVB , Financial), it is still hard to disagree when looking at the balance sheets of all banks in general.

M&T Bank: A Return to a Much Higher Value May Be Coming

Prosperity Bancshares

In this article, we discuss three banks that are a great fit for today's environment. Each has declined due to the ongoing banking crisis.

It's A Wonderful Life: 3 Regional Banks We're Buying

Citi analyst Keith Horowitz upgraded both KeyCorp and M&T Bank to Buy from Neutral, as the banking sector tries to comeback from a rough couple of weeks.

Two Bank Stocks for Bulls After the Panic, Says Citi

First Republic

New York Community Bancorp

Regions Financial

Truist Financial

While the chaos is not necessarily over, many bank stocks look to have been indiscriminately sold off. Many banks have managed interest rate risk much better than Silicon Valley Bank.

14 Bank Stocks to Buy After the Recent Silicon Valley Bank Collapse

BUFFALO, N.Y. , March 20, 2023 /PRNewswire/ -- M&T Bank Corporation ("M&T") (NYSE: MTB) plans to announce its first quarter 2023 earnings results in a press release that will be issued before the market opens on Monday, April 17, 2023.

M&T Bank Corporation Announces First Quarter 2023 Earnings Release and Conference Call

While shareholders of Silvergate, Silicon Valley Bank and Signature Bank of New York have seen their investments drop to zero, short sellers who bet against the banks have made out like, well, bandits.

Short Sellers Post Profits of $3.5 Billion on Banks' Woes

Goldman Sachs

Berkshire Hathaway sold many stocks at the beginning of the pandemic. Some of those have been good performers over the last three years, while others haven't.

Warren Buffett Has Sold Many Stocks. Did He Make a Mistake With These 2?

M&T Bank has dealt with credit quality issues in its hotel lending portfolio. M&T also focused on closing and integrating its large acquisition of People's United.

M&T Bank's Stock Is Starting to Turn the Corner

Carver Bancorp

The six-week program is designed to help empower, develop, and uplift multicultural business owners, will culminate in pitch competition HARLEM, N.Y., Feb. 28, 2023 /PRNewswire/ -- M&T Bank's Harlem Multicultural Small Business Innovation Lab, a six-week program designed to provide local entrepreneurs with guidance, education, and resources to help them start and grow businesses, is now accepting applications.

M&T Bank Announces Harlem Small Business Innovation Lab in Partnership with Carver Federal Savings Bank

M&T Bank (MTB) announces a hike of 8.3% in its quarterly cash dividend. This, along with share repurchases and strategic buyouts, will continue to enhance shareholder value.

M&T Bank (MTB) Announces 8.3% Increase in Quarterly Dividend

BUFFALO, N.Y. , Feb. 23, 2023 /PRNewswire/ -- M&T Bank Corporation (NYSE:MTB)("M&T") will participate in the RBC Capital Markets Global Financial Institutions Conference being held in New York City.

M&T Bank Corporation to Participate in the RBC Capital Markets Global Financial Institutions Conference

News for M&T Bank Stock (MTB)