M&T Bank (NYSE:MTB) delivered lower-than-expected Q4 earnings as higher deposit costs, the Federal Deposit Insurance Corp. (FDIC) assessment fees, and increased provisions took a toll on its profitability in Q4. Nonetheless, the financial services company’s net interest income (NII) exceeded the Street’s forecast.
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M&T Bank witnessed a modest deterioration in the performance of loans to commercial borrowers due to its exposure to the risky commercial real estate market. With this background, let’s examine its Q4 performance.
M&T Bank: Q4 Earnings Dip
M&T Bank’s taxable equivalent NII was $1.74 billion, down 3% quarter-over-quarter. This decline was driven by higher interest rates on customer deposits and a change in the deposit mix, partially offset by higher interest income. While its NII decreased, it came higher than the analysts’ estimate of $1.72 billion.
While M&T managed to improve its loans and deposits in Q4 and maintained tight expense control, its provision for credit losses increased to $225 million compared to $150 million in Q3. Due to the lower NII and FDIC special assessment fees, MTB’s adjusted EPS declined by 31% sequentially and 37% year-over-year. Moreover, it missed analysts’ estimates of $3.10.
Is MTB a Good Stock to Buy?
Wall Street is cautiously optimistic about MTB stock. With six Buy and eight Hold recommendations, M&T Bank has a Moderate Buy consensus rating. MTB stock lost about 10% of its value in one year, underperforming the S&P 500’s (SPX) gain of about 22%. Analysts’ average price target of $154 implies 15.89% upside potential from current levels.
