- Diluted GAAP Earnings Per Share: $3.73 for the second quarter, up from $3.02 in the first quarter.
- Net Income: $655 million, an increase of 23% from $531 million in the linked quarter.
- Return on Assets (ROA): 1.24%.
- Return on Common Equity (ROCE): 9.95%.
- Common Equity Tier 1 (CET1) Ratio: 11.44%, up from 11.08% in the first quarter.
- Net Operating Income: $665 million, up from $543 million in the linked quarter.
- Diluted Net Operating Earnings Per Share: $3.79, up from $3.09 in the first quarter.
- Net Interest Income: $1.73 billion, an increase of $39 million or 2% from the linked quarter.
- Net Interest Margin (NIM): 3.59%, an increase of seven basis points from the first quarter.
- Average Loans and Leases: $134.6 billion, a 1% increase from the linked quarter.
- Loan Yields: Increased six basis points to 6.38%.
- Average Total Deposits: $163.5 billion, a decline of $0.6 billion or less than 0.5% from the linked quarter.
- Non-Interest Income: $584 million, up from $580 million in the linked quarter.
- Non-Interest Expenses: $1.3 billion, a decrease of $99 million from the first quarter.
- Net Charge-Offs: $137 million or 41 basis points, down from 42 basis points in the linked quarter.
- Nonaccrual Loans: Decreased $278 million to $2 billion.
- Allowance to Loan Ratio: Increased one basis point to 1.63%.
- Criticized Loans: $12.1 billion, down from $12.9 billion at the end of March.
- Net Interest Income Outlook for 2024: $6.85 billion to $6.9 billion.
- Fees Outlook for 2024: $2.3 billion to $2.4 billion.
- Expenses Outlook for 2024: $5.25 billion to $5.3 billion.
- Charge-Offs Outlook for 2024: Near 40 basis points.
- Tax Rate Outlook for 2024: 24% to 24.5%.
- Preferred Dividends: Expected to be approximately $47 million in the third quarter and $36 million in the fourth quarter.
Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- M&T Bank Corp (MTB, Financial) reported a significant increase in net income for the second quarter, rising 23% to $655 million compared to the previous quarter.
- The CET1 ratio improved to 11.44%, indicating strong capital levels and financial stability.
- Customer deposits increased sequentially, and total deposit costs have leveled off, reflecting effective deposit management.
- Net interest income and net interest margin both improved from the first quarter, showing positive trends in core earnings.
- The bank continues to make progress in reducing criticized and nonaccrual loan balances, indicating improving asset quality.
Negative Points
- CRE loans declined by 4%, reflecting continued low originations and elevated paydowns, which could impact future growth.
- Non-interest bearing deposits declined by $0.9 billion, primarily due to lower commercial and business banking balances.
- The provision for credit losses was $150 million, indicating ongoing concerns about potential loan defaults.
- Non-interest income remained relatively flat, with only a slight increase from the previous quarter, suggesting limited growth in fee-based revenues.
- The bank incurred $5 million in pre-tax expenses related to the FDIC special assessment, impacting overall profitability.
Q & A Highlights
Q: So, I wanted to ask on NII. So you beat on NII this quarter and then your new guide for NII implies that quarterly NII will be relatively flat from 2Q levels and you did see a noticeable increase quarter on quarter -- this quarter NII. So can you just unpack the drivers in the back half? Is there some conservatism baked in there? Or is there some timing difference in being neutral to rates, but maybe perhaps being a little bit more asset-sensitive with the first rate cut, if you can just unpack those drivers there?
A: Yeah, thanks Manon, our position from rate sensitivity is really quite neutral. It's based on assumptions, but I feel we are really neutral there. If you look on the slide deck where we had net interest income in one of the bullets there, we call highlight that we had a five basis point positive impact on nonaccrual interest. So let me explain that to you. So when our loans go into nonaccrual, we basically when we still receive payments, both principal and interest, all that goes to principal and then if the loan is basically resolved favorably and they pay us off, obviously, we pay off the principal balance and then anything leftover goes into net interest income. So what we saw in the second quarter was basically a large amount of loans that basically came out favorably out of our nonaccrual portfolio. So what we put on there and what I talked about in the prepared remarks is that if you look at our average nonaccrual interest for the last five quarters has been running around $15 million. This quarter, we got double that. So I would basically say our NIM this quarter was actually on track because if you adjust the $15 million out, we were at 5.56 NIM. And I said that we would be mid 350s for that the second quarter. So we're really on path to what I said mid 350s second quarter and then high 350s for third and fourth quarter is really where we wanted to be and expect to be. So I think we're just on track, Manon.
Q: And just to confirm, that five basis points is where you are above normal, right. The five basis points is the total impact.
A: It's three is what I would say, be normal to the run rate, yeah so (multiple speakers) go ahead.
Q: And your five basis points above that?
A: No, no, no, we are three. So we were 352. We said we would be in the mid-350s. I say we really came in at 356, if you back out the extra above nonaccrual interest that we normally get, and we're already at nonaccrual interest every quarter we've been averaging a couple of basis point benefit every quarter because of that, that's going to continue for a long time.
Q: And then maybe (inaudible) position in the category of no good deed goes unpunished. But on the buyback resumption, your message in the deck is that capital level should at least stay at current levels of around 11.5%, just given that the SCB went lower, given the excess capital position, what do you need to see before you accelerate the pace of buybacks and bring that capital ratio lower?
A: Yes, I think it's pretty simple. I think we are aggressively working down in our asset quality, our criticized loans, nonperforming assets. I think we need to continue to make progress on that. As we make progress on that, you could see us desire to increase our repurchase shares potentially. Obviously, the economy is a factor in my prepared remarks, we said we don't think it's likely, but it's possible maybe you go into recession. So if that were to happen, I think we'd have to view that and just be a little bit more defensive if that made sense or not. And if so, when I see the impacts of Basel III, I know we are hearing and more favorable things, but until we actually see it providing you really don't know what's going on. But those are probably the primary things that we're working on. We continue to shrink our CRE concentration make great progress there. I have no doubt we will continue to make great progress in the next couple of quarters as well there.
Q: Good morning. (multiple speakers) elaborate -- morning, the big drop in the commercial real estate on a period-end basis. I think it's down about 9%, obviously a great job bringing that down. And I know you touched on some of the kind of opportunities to offload that, but it's just a bigger drop than I would have thought. And I don't know if there's any reclass into C&I as you kind of improve some of those like guarantees and things like that. So just elaborate on that in terms of how you're able to bring it down so much. Thank you.
A: Yeah, no, happy to answer that, Matt. So we are very focused and working really hard both the first line and second line is working hard and made tremendous progress in bringing our CRE concentration numbers down. We did see a lot more liquidity in the marketplace this quarter and we were able to see some of our clients that we had actually in criticized multifamily, be able to do government placements, how into the marketplace for liquidity. So as we continue to have that liquidity, that helps us basically cure some of our criticized loan balances. The other thing that I would tell you is that we are doing a finance transformation. Finance transformation is basically putting in a new general ledger system, sub ledgers which we are doing really well, and we're about halfway through that process now, but it's also improving and changing processes. So as we improve and change processes, we are putting in better controls in and more ways of actually how we put loans on the books and that is causing some grading to go from what CRE would be into C&I owner-occupying because it really comes down to the source of repayment. So repayment is from an operating entity. It's basically not a CRE loan. It is C&I, owner-occupied loan.
Q: On the back to see our rating. I know you mentioned the ongoing focus to reduce the concentration of CRE. Where do you see the CRE to risk-based capital percentage go in and believe in the past you've indicated you wanted to feed into the 150% range. So when we get that update and then separately, in terms of the improvement that you saw in credit this quarter in terms of the past-due declines, nonaccruals and the criticized. Can you just talk about what specifically you saw that is driving that and broadly, those trends could continue in that direction? Thanks.
A: Yeah, sure. So we've made tremendous progress over the last three-plus years on getting our CRE concentration down the plans that we put into place at that point and continue to
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
