M&T Bank Corporation MTB pulled off fourth-quarter 2019 positive earnings surprise of 3.7% on higher mortgage banking revenues. Earnings per share of $3.60 surpassed the Zacks Consensus Estimate of $3.47. However, the bottom line compares unfavorably with $3.76 reported in year-ago quarter.
The company’s results were supported by higher fee income and improved loans balance. Further, strong capital position was a tailwind. However, rise in expenses and deteriorating credit metrics were key concerns.
Net income for the quarter was $493 million, down 10% from the $546 million recorded a year ago.
On an operating basis, M&T Bank reported fourth-quarter net income of $496 million or $3.62 per share compared with $550 million or $3.79 in the prior-year quarter.
For full-year 2019, M&T Bank reported net income of $1.93 billion or $13.75 per share compared with $1.92 billion or $12.74 in the previous year.
Revenues Decline, Loans Climb, Expenses Escalate
M&T Bank’s revenues came in at $1.53 billion, marginally down from the year-ago quarter. Also, it surpassed the consensus estimate of $1.52 billion.
For 2019, the company reported revenues of $6.19 billion, up 4.4% year over year. Further, it topped the consensus estimate of $6.17 billion.
Taxable-equivalent net interest income declined 5% year over year to $1.01 billion in the quarter. The fall stemmed from lower net interest margin, partially offset by higher average earning assets. Net interest margin contracted 14 basis points (bps) to 3.64%.
The company’s non-interest income came in at $521 million, up 8% year over year. Higher mortgage banking revenues, trust income, trading account and foreign exchange gains, along with service charges on deposit accounts, primarily led to this upsurge.
Non-interest expenses totaled $824 million, up 3% from the prior-year quarter. Excluding certain non-operating items, non-interest operating expenses were $819 million, up 2.8%. This upside mainly stemmed from rise in almost all components of expenses, partly mitigated by lower amortization of core deposit and other intangible assets.
Efficiency ratio came in at 53.1%, up from the 51.7% recorded in the prior-year quarter. A higher ratio indicates fall in profitability.
Loans and leases, net of unearned discount, came in at $90.9 billion at the end of the reported quarter, up 1.2% from the prior quarter. However, total deposits declined marginally to $94.8 billion.
M&T Bank's net operating income indicated an annualized rate of return on average tangible assets and average tangible common shareholder equity of 1.67% and 19.08%, respectively, compared with 1.93% and 22.16% recorded in the prior-year quarter.
Deteriorating Credit Quality
For M&T Bank, credit metrics deteriorated during the October-December quarter. Provision for credit losses rose 42% on a year-over-year basis to $54 million. Also, net charge-offs of loans were $41 million, up 9%.
The ratio of non-accrual loans to total net loans was 1.06%, up 5 bps year over year. Non-performing assets increased 8% to $1.05 billion.
M&T Bank’s estimated Common Equity Tier 1 to risk-weighted assets under regulatory capital rules were 9.72%. Tangible equity per share came in at $75.44, up 8.9% year over year from $69.28.
During the December-ended quarter, M&T Bank repurchased a total of 1.72 million shares of its common stock for a total cost of $282 million, at an average price of $163.69 per share.
In 2019, the company repurchased 8.26 million shares for a total cost of $1.35 billion.
M&T Bank’s results displayed a decent performance in the quarter. Rise in loans balance continues to aid revenues. However, deterioration in credit quality was a major headwind. Additionally, rise in expenses and fall in margin were concerns. Nevertheless, we believe the company, with its sturdy business model and strategic acquisitions, is well poised for growth.
M&T Bank Corporation Price, Consensus and EPS Surprise
M&T Bank Corporation price-consensus-eps-surprise-chart | M&T Bank Corporation Quote
Currently, M&T Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Signature Bank SBNY reported fourth-quarter 2019 earnings of $2.78 per share, which outpaced the Zacks Consensus Estimate of $2.69. However, the bottom line decreased 5.4% from the prior-year quarter’s reported figure.
Regions Financial Corporation’s RF fourth-quarter 2019 adjusted earnings of 40 cents per share surpassed the Zacks Consensus Estimate of 39 cents. Moreover, the figure reflects 5.3% rise year over year.
People's United Financial Inc. PBCT reported fourth-quarter 2019 operating earnings of 37 cents per share, which surpassed the Zacks Consensus Estimate of 33 cents. Also, the bottom line increased 2.8% year over year.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
M&T Bank Corporation (MTB) : Free Stock Analysis Report
Signature Bank (SBNY) : Free Stock Analysis Report
Regions Financial Corporation (RF) : Free Stock Analysis Report
People's United Financial, Inc. (PBCT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research