M&T BANK CORP Q3 FY2024 earnings call

• M&T Bank continues to show strength in a dynamic economic environment, being among the nation's top 10 SBA lenders for the 16th consecutive year and launching initiatives for financial inclusion and updating environmental goals. - Net interest margin and non-interest income grew sequentially while growing loans and reducing CRE concentration. Funding costs were well managed, share repurchases restarted, and ROA, ROCE, and CET1 ratio were strong. - Asset quality improved with reduction in non-accrual balances and net charge-offs below outlook. Details on loans, liquidity, deposits, non-interest income, expenses, credit quality, and capital were provided.

For the third quarter, taxable-equivalent net interest income was $1.74 billion, an increase of $8 million or 1% from the linked quarter. The net interest margin was 3.62%, an increase of 3 basis points from the second quarter. Average loans and leases increased slightly to $134.8 billion. C&I loans grew 3% to $59.8 billion, CRE loans declined 8% to $29.1 billion, residential mortgage loans were relatively unchanged at $23 billion, and consumer loans grew 4% to $22.9 billion. Non-interest income was $606 million compared to $584 million in the linked quarter. Non-interest expenses were $1.3 billion, an increase of $6 million from the second quarter. Net charge-offs for the quarter were $120 million or 35 basis points down from the linked quarter.

• Full year NII outlook unchanged. Fourth quarter taxable equivalent NII expected at least $1.73 billion with net interest margin in the low 3.60s. Average total loans expected ~$136 billion, total deposits at least $160 billion. Fourth quarter non-interest income about $600 million, expenses ~$1.32 billion. Full year net charge-offs expected near 40 basis points, tax rate for fourth quarter about 24.25%, preferred dividends ~$36 million, and continue $200 million share repurchase.

• Potential mild recession from lagged impact of rate hikes. - Impact of interest rate changes on deposit betas and loan performance. - Volatility in non-interest bearing deposits. - Mix changes in loan portfolio affecting charge-offs.

Q: Gerard Cassidy asks about CET1 ratio and potential increase in share repurchases, and how Basel III end game affects this.

A: Daryl Bible responds that M&T has flexibility with a strong CET1 ratio, will continue to assess economy and loan growth/RWA to determine share repurchases and long-term CET1 targets.

Q: Ebrahim Poonawala asks about CRE criticized loans and impact on CET1 ratio and reserve ratio.

A: Daryl Bible states that there were many upgrades in criticized loans this quarter, with positive trends in healthcare and construction sectors, and momentum in reducing criticized loans continuing.

Q: Manan Gosalia asks about deposit beta and funding loan growth.

A: Daryl Bible says deposit beta is expected to continue moving, with confidence in lower beta in fourth quarter and plans to grow core deposits and manage non-core funding.

Q: Christopher Spahr asks about loan growth, especially CRE stabilization.

A: Daryl Bible mentions runoff in CRE expected for a couple more quarters with pipelines building, and CRE balances not expected to grow until mid-2025.

Q: Dave Rochester asks about non-interest bearing deposits and loan utilization.

A: Daryl Bible notes non-interest bearing deposits have some volatility but are playing out as expected, and loan utilization in C&I may increase as markets recover and clients draw on lines.

Q: Frank Schiraldi asks about loan growth outlook and loan yield repricing.

A: Daryl Bible says 2025 loan growth is being planned, with loan yields showing positive repricing on fixed rate loans across various portfolios.

Q: John Pancari asks about operating leverage and loan loss reserve ratio.

A: Daryl Bible states positive operating leverage expected in 2025, and loan loss reserve ratio is affected by mix changes in the loan portfolio but is being managed for good capital use.

Q: Nathan Stein asks about NIM trajectory and other revenue.

A: Daryl Bible says confident in low 3.60s NIM for fourth quarter and will provide 2025 guidance in January, with other revenue driven by loan syndications and merchant/card fees.

Q: Zach Westerlind asks about expense projects and through-the-cycle charge-offs.

A: Daryl Bible says expenses in fourth quarter are a mix of one-time and run-rate projects, and through-the-cycle charge-offs historically are 34 basis points, with mix changes in the loan portfolio affecting this but being managed.