M&T Bank Corporation Q3 FY2025 earnings call

• M&T released its 2024 sustainability report, highlighting $5 billion in sustainable lending and investments and over $58 million to nonprofits. It's the top SBA lender by total volume. - Third quarter results had strong operating returns, net interest margin expansion, record fee income, improved efficiency ratio, and better asset quality. - Increased quarterly dividend by 11% to $1.50, executed $409 million in share repurchases, and grew tangible book value per share by 3%. - Taxable equivalent net interest income increased, net interest margin improved due to various factors, average loans and leases grew with specific components, deposits had changes, non-interest income had growth in different categories, and non-interest expenses increased with specific components.

M&T Bank Corporation's third quarter results showed strong momentum. Operating ROTA was 1.56% and ROTCE was 17.13%. Net interest margin expanded to 3.68%. Fee income excluding notable items reached a record level. Revenues grew more than expenses, resulting in an efficiency ratio of 53.6%. Asset quality improved with a $584 million reduction in commercial criticized balances and $61 million reduction in non-accrual loans. Taxable equivalent net interest income was $1.77 billion, up $51 million from the prior quarter. Average loans and leases increased $1.1 billion to $136.5 billion. Average total deposits declined $700 million. Non-interest income was $752 million, with strength in mortgage, trust, trading, and other revenues. Non-interest expenses were $1.36 billion, up $27 million from prior quarter.

• Expect taxable equivalent NII of approximately $1.8 billion for Q4, full year NII excluding notable items at low end of $7 billion to $7.15 billion range. - Q4 net interest margin expected to be ~3.7%. - Expect continued loan growth with average total loans of $137 billion to $138 billion. - Q4 non-interest income outlook $670 million to $690 million. - Q4 expenses expected $1.35 billion to $1.37 billion. - Q4 net charge-offs expected 40 to 50 basis points, full-year net charge-offs less than 40 basis points. - Q4 tax rate outlook 23.5% to 24%. - Plan to operate with CET1 ratio in 10.75% to 11% range for remainder of year and be opportunistic with share repurchases.

• Concern about economic slowdown due to weakening labor market, which could affect consumer spending and business CapEx. - Monitoring potential impact of prolonged government shutdown on customers, communities, and economy. - Credit risks in certain sectors like lower-end consumers, some commercial sectors, and potential issues with private BDCs and SSFA structures which are procyclical.

Q: Ken Usdin asked about loan growth, specifically CRE inflection.

A: Daryl Bible said CRE is showing more rebound with increased production and approval rates, optimistic about growth in next quarter or two.

Q: Gerard Cassidy asked about CRE approvals doubling.

A: Daryl Bible said improved systems and processes, better collaboration between teams led to more approvals in CRE and C&I.

Q: Gerard Cassidy asked about regulatory environment change and impact on profitability.

A: Daryl Bible said observations now have a year to fix before being re-reviewed, timeline to fix is faster, fewer people needed in remediation, and redeployable.

Q: Erika Najarian asked about CRE balance bottom and rate trends.

A: Daryl Bible said hopes Q4 is bottom, but depends on payoffs, and 2026 has fewer maturities, optimistic it will bottom and start growing.

Q: Erika Najarian asked about NDFI exposure.

A: Daryl Bible explained NDFI exposure in categories like fund banking, industrial CRE, residential mortgage warehouse, BDCs, and SSFA structure risks.

Q: John Pancari asked about CET1 target and loan competition.

A: Daryl Bible said CET1 target is a board discussion, and competition is more competitive with spreads down 10-15 basis points but still good production.

Q: Chris McGratty asked about operating leverage and CRE criticized balances.

A: Daryl Bible said optimistic CRE criticized balances will continue improving, and geography for M&A is adjacent markets within current footprint.

Q: Manan Gosalia asked about NCO lumpy items and operating leverage.

A: Daryl Bible said Q4 NCO driven by large C&I loans, and operating leverage positive with revenue growth more than expenses.

Q: Matt O'Connor asked about credit events and rate impact.

A: Daryl Bible said stress in lower end consumers, tightened in small business and leasing, and sectors impacted by tariffs, private equity, etc.

Q: Dave Rochester asked about margin upside and government shutdown impact.

A: Daryl Bible said margin has upside potential, and monitoring government shutdown impact on various sectors.

Q: Ken Usdin asked about Q4 expense increase.

A: Daryl Bible said it's due to ongoing projects and getting things finished off, with expenses expected to be managed as revenue grows faster than expenses.