2024-01-25 04:36:51 ET
Summary
- M&T Bank reported a second quarter of consecutive growth in average deposits in Q4'23.
- The bank's net interest income has declined for four consecutive quarters. Credit provisions are trending up.
- The risk profile for M&T Bank is less attractive due to the revaluation of shares and the Federal Reserve's plan to lower interest rates in FY 2024.
- I see limited upside in FY 2024 given the expectation of weaker NII and the fact that shares have revalued close to book value.
M&T Bank ( MTB ) is a well-run regional financial institution that last week also reported better than expected results for its fourth quarter. The regional bank saw its second consecutive quarter of average deposit growth and M&T Bank’s deposits now exceed the pre-crisis level as well. Given that shares of M&T Bank have sharply revalued higher after the Federal Reserve announced that it will seek a lower federal fund rate in FY 2024, I believe the risk profile is not as attractive as it was back in May or June 2023. As a result, I am lowering, despite favorable deposit trends and a solid earnings profile, my rating from buy to hold for shares of M&T Bank....
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M&T Bank: Fully Re-Rated (Rating Downgrade)