On Sep 20, 2016, we issued an updated research report on M&T Bank Corporation MTB. The Buffalo, NY-based banking giant’s growth prospects look encouraging as it continues to exhibit strength in several areas.
M&T Bank has managed to continue its growth in net interest income (NII) despite the low interest rate environment and a competitive business scenario. Over the last six years (ended Dec 2015), the company’s NII has improved at a compound annual growth rate (CAGR) of nearly 5%, supported by loan growth. Further, the upward trend continued in first-half 2016.
M&T Bank’s solid capital position not only allows the company to enhance shareholders’ value through share buybacks and dividend increases, but also aids in undertaking expansion moves. The company, which has grown meaningfully over the years through several mergers and acquisitions, widened its retail branch network in the eastern U.S. last year through the Hudson City merger. Notably, including the acquired loans from the merger, M&T Bank anticipates low- to mid-single digit growth in total loans in 2016.
However, the company’s bottom-line growth remains challenged from escalating costs which surged at a CAGR of 8% over the last six years (2010–2015), with the trend continuing in first-half 2016. Given the ongoing investments in several areas including technology, the company’s expense base should remain under pressure in the near term.
Further, M&T Bank continues to encounter many investigations and lawsuits from investors and regulators, which may result in increased litigation provisions in future.
Shares of M&T Bank have gained just 2% over the past six months.
Over the past 30 days, the Zacks Consensus Estimate remained stable at $7.94 per share and $8.61 per share for 2016 and 2017, respectively.
M&T Bank currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the finance space include Meta Financial Group, Inc. CASH, Flagstar Bancorp Inc. FBC and LPL Financial Holdings Inc. LPLA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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