M&T Bank Corporation
Analysis
M&T has flipped from a bank shrinking its loan book to one growing it again, but the cheap funding and falling credit losses that paid for that growth are now turning. Management still calls the 17% return target for 2027 attainable. How much of that 2027 return target rests on buybacks versus lending?
- Lending is growing again after years of running down.
Commercial real estate turned positive in Q2 for the first time since 2021, and all four loan books are now guided to grow. That is what management leans on for its return target instead of buybacks, which changes what profit depends on.
- Deposits, not loan demand, are now the limit on growth.
Q3 deposit costs rose as time deposits repriced and funded the loan book, and the net interest margin slipped to 3.65%. Management will trade a few points of margin for volume, so each new dollar of loans earns less than the last. How much of the new loan growth is funded by higher-cost time deposits?
- Credit has stopped getting better.
Criticized loans rose in Q3 for the first time in nine quarters, led by office and assisted-living credits. Management calls it 'bouncing along the bottom', but falling credit losses paid for the buybacks, so a turn costs shareholders cash. Which office and assisted-living credits drove the Q3 rise in nonaccruals?
- Commercial real estate recoveryThe bull case is that commercial real estate has stopped shrinking, so total loan growth is no longer held back by the portfolio that had dragged on it for years.
- Fee income diversificationTrust, treasury management and mortgage sub-servicing are growing faster than the balance sheet, which makes earnings less dependent on the spread between loan and deposit rates.
- Credit losses near lowsAsset quality has improved for several years running and losses remain well below normal, which frees up capital that would otherwise sit in reserves.
- Margin traded for volumeThe bear case is that the bank accepts a lower spread on new loans to win relationships, so revenue grows slowly even as the balance sheet expands.
- Office real estate lossesOffice commercial real estate remains heavily criticized, and a weaker economy or higher rates could push credit costs above the low levels now assumed in guidance.
- Expense growthTechnology, cyber and enterprise spending keep expenses at the top of guidance, so operating leverage depends on fee income arriving on schedule.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$1K | May 15 | Jul 1 |
Donald Trump Republican · Executive | Purchase | ≥$15K | May 11 | Jul 1 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Mar 17 | May 13 |
Gilbert Ray Cisneros, Jr. Democratic · House · CA-31 | Purchase | ≥$1K | Nov 18 | Dec 15 |
Ro Khanna Democratic · House · CA-17 | Purchase | ≥$1K | Oct 28 | Nov 6 |
Congressional trading data provided by QuiverQuant
How M&T Bank turned $9.7B of revenue into $3.7B of operating income.
| Revenue | ||
|---|---|---|
| Retail Banking | $501.0M | ▲ 6.37% YoY |
| Commercial Banking | $302.0M | ▲ 11.03% YoY |
| Total revenue | $9.7B | |
| Operating income | $3.7B | 38.1% |