Key Factors to Affect M&T Bank (MTB) This Earnings Season

M&T Bank Corporation MTB is scheduled to report fourth-quarter and 2021 results on Jan 20, before the opening bell. The company’s revenues and earnings are expected to have decreased year over year.

M&T Bank reported an earnings surprise of 6.8% in the third quarter. A fall in net interest margin and a rise in expenses were the key undermining factors. Nonetheless, a rise in non-interest income and recapture of provisions were tailwinds. Further, results highlight the company’s strong capital position during the quarter.

M&T Bank has a decent earnings surprise history, having surpassed estimates in three of the last four quarters and missing in the other. The company has a trailing four-quarter earnings surprise of 8.7%, on average.

Key Factors to Note

Net Interest Income (NII): The lending scenario in the fourth quarter improved moderately as businesses reopened, corporate confidence rose and economic growth gained traction.

Per the Fed’s latest data, the demand for commercial and industrial loans, commercial real estate loans (accounting for a significant part of its total loans), and residential real estate loans accelerated in the fourth quarter.

Yet, high levels of pay downs and payoffs and stiff loan pricing competition are likely to have hindered loan volumes. This, along with a persistently low-interest-rate environment, is expected to have had some adverse impacts on its NII and net interest yield in the quarter.

Amid these, the Zacks Consensus Estimate of $141.8 billion for fourth-quarter average interest-earning assets suggests a 1% rise from the prior quarter’s reported number. NII is estimated to be $924 million, indicating a 4.5% fall from the prior quarter’s reported figure.

Fee Income: The company is anticipated to have witnessed growth in trust revenues on decent equity market gains in the to-be-reported quarter. The Zacks Consensus Estimate of $161 million for the same implies a 2.6% sequential improvement.

In the fourth quarter, the deposit balance improved, supported by stimulus-driven liquidity and a rise in money market balances. Also, deposit service charges should have continued to normalize as the pandemic-related concessions continue to reduce. These are likely to have driven higher revenues from service charges on deposits. The Zacks Consensus Estimate for the same of $106 million suggests a marginal rise from the prior quarter’s levels.

Mortgage production continued to normalize in the fourth quarter as mortgage rates increased sequentially. Also, moderation in refinancing activity due to the rise in rates is expected to have weighed on mortgage banking income for M&T Bank in the to-be-reported quarter. The Zacks Consensus Estimate for the same of $133 million suggests a slip of 16.9% from the prior quarter’s levels.

Expenses: Given M&T bank’s ongoing investments in several areas, including operational infrastructure and technology, we expect the company’s expense base to have been under pressure in the fourth quarter. This is likely to have limited operational efficiency and bottom-line growth.

Here is what our quantitative model predicts:

M&T Bank has 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 this time around.

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 +0.25%.

Zacks Rank: M&T Bank currently carries a Zacks Rank of 3.

Earnings and Revenue Estimates

Prior to the fourth-quarter earnings release, the company is witnessing upward estimate revisions, indicating the bullish sentiment of analysts. The Zacks Consensus Estimate for fourth-quarter earnings has been revised marginally upward to $3.29 in the past week. However, the figure suggests a year-over-year fall of 7.1%.

The consensus estimate for revenues of $1.46 billion suggests a decline of 5% from the year-ago quarter’s levels.

Management 2021 Outlook

Management projects total loan to be flat to down slightly on a year-over-year basis, with ongoing headwinds on the national auto dealer and residential-mortgage front.

Excluding PPP, NII is anticipated to decline in the low-single-digit rate on a year-over-year basis.

Non-interest revenues are projected to grow at a low-single-digit rate.

Other Bank Stocks Worth a Look

BOK Financial BOKF, The PNC Financial Services Group (NYSE:PNC), Inc. PNC and Huntington Bancshares Incorporated (NASDAQ:HBAN) HBAN are a few other companies worth considering as these have the right combination of elements to beat on earnings in their upcoming releases, per our model.

BOK Financial has an Earnings ESP of +3.64% and a Zacks Rank of 2 (Buy) at present. BOKF is slated to report fourth-quarter and full-year results on Jan 19.

Over the past 30 days, BOKF’s Zacks Consensus Estimate for quarterly earnings has moved marginally downward.

PNC Financial is scheduled to release fourth-quarter 2021 and annual earnings on Jan 18. PNC, which is Zacks #3 Ranked at present, has an Earnings ESP of +2.29%. You can see the complete list of today’s Zacks #1 Rank stocks here.

PNC’s fourth-quarter earnings estimates have moved marginally lower over the past month.

Huntington Bancshares is scheduled to release earnings on Jan 21. HBAN, currently a #3 Ranked player, has an Earnings ESP of +1.46%.

The Zacks Consensus Estimate for Huntington Bancshares’ fourth-quarter earnings has been unchanged over the past month.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar .

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