M&T Bank Beats Estimates on Higher Net Interest Margin and Stronger Mortgage Banking

M&T Bank reported first quarter results early Monday that beat analyst estimates. In the press release, the company attributed the stronger than expected results to higher net interest margins, stronger mortgage banking revenue, and declining credit costs.

For the first quarter of 2013, M&T Bank reported earnings per share of $2.06, beating the consensus analyst estimate of $1.96 by $0.10 or 5.1 percent. The results represented a 32 percent gain from the $1.50 reported in the same period a year ago. Return on assets in the quarter was reported as 1.36 percent and return on equity was a strong 11.1 percent in the quarter, up from 1.06 percent and 9.04 percent respectively in the same period a year ago.

Net interest income, effectively the profit on traditional banking businesses, rose 6 percent to $663 million from $627 million the same period a year ago. The company attributes the gain in net interest income to an increase in average earning assets to $5.4 billion, fueled by growth in loans and leases. Also, a widening of the net interest margin by 2 basis points to 3.71 percent contributed to the boost.

In addition, the provision for credit losses fell in the quarter, a positive for the company, to $38 million from $49 million in both the first and fourth quarters of 2012. Net charge-offs were also lower at $37 million from $48 million a year ago and $44 million in the fourth quarter.

Non-interest income also rose in the quarter to $433 million from $377 million a year ago but was lower than the fourth quarter's $453 million. Contributing to the improvement from the year-earlier quarter was a $37 million rise in mortgage banking revenues, resulting from increased loan volumes and wider margins, and higher trust income.

Rene F. Jones, Executive Vice President and Chief Financial Officer, noted, "M&T's results for the quarter truly reflect the strength of our operating model. Residential mortgage banking revenues continued to be robust and trust income grew nicely from last year's fourth quarter."

"Credit costs in the recent quarter were well below our historical trends, with the ratio of net charge-offs to average loans improving to .23%. Our financial performance has allowed us to make continued investments in our infrastructure while improving our capital ratios, as demonstrated by a 36 basis point increase in our Tier 1 common ratio during the quarter."

M&T Bank shares were unchanged in pre-market trading at $100.24 per share as of 8:42 am.