M&T BANK CORP Q4 FY2024 earnings call

M&T's success is driven by its purpose of making a difference in people's lives through a relationship-based model. In 2024, the bank focused on four priorities: building New England and Long Island markets, optimizing resources, making systems resilient, and developing risk management. The bank had strong financial performance in 2024, with results meeting or exceeding expectations for NII, fee income, expenses, and loans/deposits. In the fourth quarter, diluted earnings per share were $3.86, net income was $681 million, ROA was 1.28%, ROCE was 9.75%, and the CET1 ratio was 11.67%. Loan trends included C&I and consumer loan growth offsetting CRE decline. Deposit trends showed strong growth with noninterest bearing deposits increasing. Noninterest income was boosted by growth in trust, mortgage banking, and other revenues. Noninterest expenses increased due to various factors, but the efficiency ratio was 56.8%. Credit quality improved with nonaccrual loans decreasing and net charge-offs in line with expectations. Capital levels were strong with a CET1 ratio of 11.67% at the end of the fourth quarter.

In the fourth quarter, average total loans and leases increased $1 billion to $135.7 billion. C&I loans grew 2% to $60.7 billion, CRE loans declined 4% to $27.9 billion, residential mortgage loans were relatively unchanged at $23.1 billion, and consumer loans grew 5% to $24 billion. Average total deposits rose $3.1 billion or 2% to $164.6 billion, with interest-bearing deposit costs decreasing 24 basis points. Taxable-equivalent net interest income was $1.74 billion, with a net interest margin of 3.58%, down 4 basis points from the prior quarter. Noninterest income was $657 million in the fourth quarter, up from $606 million in the prior quarter. Noninterest expenses were $1.36 billion, an increase of $60 million from the prior quarter, with an efficiency ratio of 56.8%. Net interest charge-offs for the quarter totaled $160 million, and nonaccrual loans decreased $236 million to $1.7 billion.

The bank expects taxable-equivalent net interest income to be $7.1 billion to $7.2 billion with a net interest margin in the mid-360s. Noninterest income is expected to be $2.5 billion to $2.6 billion, driven by core businesses. Total noninterest expense, including intangible amortization, is anticipated to be $5.4 billion to $5.5 billion. Net charge-offs are expected to be near 40 basis points with normalization in the consumer portfolio and improvement in commercial credit costs. The bank expects to reach an 11% CET1 ratio in 2025 and quarterly share repurchases to be higher than in the third and fourth quarters of 2024. The bank remains committed to four priorities for 2025: growing New England and Long Island markets, optimizing resources, making systems resilient, and developing risk management.

Risks include economic volatility that could impact loan demand and credit quality. Regulatory changes may affect operations and capital requirements. There are also credit risks in commercial real estate and consumer portfolios that could impact the bank's financial performance.

Q: Daryl, can you unpack your comments on capital and buybacks?

A: So Manan, we feel comfortable that we can basically operate our company at 11% where we are today and what the economy looks like and all that. So our plans are to bring our ratios down throughout the year. We'll be opportunistic from that but it's also going to be driven by our RWA growth, how much our loan growth is and all that. We aren't going to push and make loans that don't make sense. We're going to do what is -- what we always do to serve our customers and communities. But it's fluid right now whether we're going to have strong loan growth in '25 or something maybe not as strong. So we'll have a lot of flexibility there to do that. But if the plan came out, and we actually hit our plan that we expect for '25, we'd probably do a little bit over $2 billion with that loan growth. If we have less loan growth, we'll do more share repurchase. If we have more loan growth, we'll do less share repurchase.

Q: I wanted to start off on the progress you've made in reducing your CRE exposure. It's been well reflected in your declining stress capital buffer. But as you reflect on that improvement, what's been the response from the client side? You're there for them, but have they noticed a difference as you've actively taken that concentration ratio from 136% down to 136%, 183%?

A: I would say Peter D’Arcy and his team have done a tremendous job really managing through what we've been going through the last couple of years. We have been basically doing some more placements in some of our customers. We did some few sales as well over the last couple of years. But those have been more, what I would call, noncore customer-related relationships for the most part. So our core customer base is still intact. Even though we weren't really lending much in CRE over the last couple of years, they are -- now know that the pipeline is open and we're now working with them. If you actually look at the pipeline in CRE, we have about $1.5 billion in pipeline now there, which is starting to build, which is nice. But I'd say, overall, I think our core customers are still very loyal and support M&T. And the ones that haven't been supportive of their credits or more financial-oriented were the ones that we kind of were more aggressive on trying to put them out of the bank.