M&T Bank (MTB) To Post Q1 Earnings: Is A Beat In Store?

We expect M&T Bank Corporation (NYSE:MTB) to beat on earnings expectations when it reports first-quarter 2017 results, before the opening bell on Apr 17.

Why a Likely Positive Surprise?

Our proven model shows that M&T Bank has the right combination of the two key ingredients to beat earnings.

Zacks ESP: The Earnings ESP for the stock, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at +1.56%. This is a major indicator of a likely positive earnings surprise for the company. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: M&T Bank carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings.

The combination of M&T Bank’s Zacks Rank #3 and ESP of +1.56% makes us confident of an earnings beat.

Further, the company boasts a decent earnings surprise history. M&T Bank posted an earnings beat in two of the trailing four quarters, with an average positive earnings surprise of 0.87%.

M&T Bank Corporation Price and EPS Surprise

M&T Bank Corporation Price and EPS Surprise | M&T Bank Corporation Quote

Shares of M&T Bank gained 33.8% over the past six months compared with 27.0% growth recorded by the Zacks categorized Banks – Major Regional industry.

What’s in Store in Q1?

Higher Expenses: The Federal Deposit Insurance Corporation has imposed a surcharge on large banks to recapitalize the deposit insurance fund, which started in third-quarter 2016. Therefore, management estimates such surcharge to escalate the assessment expense by $5 million per quarter. Owing to seasonality in the first quarter, increase in salaries and benefits – primarily reflecting annual equity incentive compensation and other expenses – is likely to weigh on the bank’s expense base.

Nonetheless, M&T Bank intends to keep core expenses relatively under control, despite continued investment spending, including technology investment. Also, the company is focused on recording a positive operating leverage.

Net Interest Income to Grow: Given the rise in interest rates, net loan growth is expected in the mid-single-digit range, driven by sluggish growth in commercial and consumer loans, along with a slower pace of runoff in residential mortgage loans.

Pressure on Net Interest Margin (NIM) Might Ease: Though the prolonged low-rate environment has taken a toll on the bank’s margins over the past several quarters, the Fed’s recent rate hike for the third time since the financial crisis, and its commitment to raise rates faster (two more times) this year, based on a convincing pace of economic growth, should help banks get rid of shrinking margins.

Fee Income to Decline: Fee income is expected to decline on low mortgage banking revenue and seasonally weak service charges on deposits. Notably, a higher interest rate environment is likely to put mortgage banking under pressure. However, improved capital markets are anticipated to be a favorable factor. Management anticipates other fee businesses to grow in low- to mid-single-digit range.

Notably, activities of M&T Bank during the quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the to-be-reported quarter increased slightly to $1.92, over the last seven days.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model, they have the right combination of elements to post an earnings beat this quarter.

BB&T Corporation (NYSE:BBT) has an Earnings ESP of +5.71% and a Zacks Rank #3. It is scheduled to report first-quarter 2017 results on Apr 20. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for SunTrust Banks, Inc. (NYSE:STI) is +2.41% and it carries a Zacks Rank #2. The company is scheduled to release first-quarter results on Apr 21.

The PNC Financial Services Group, Inc. (NYSE:PNC) has an Earnings ESP of +0.54% and a Zacks Rank #2. It is slated to report first-quarter results on Apr 13.

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