M&T Bank Corp (NYSE: MTB) received a significant boost on October 4 when Wolfe Research upgraded the stock to Outperform from Peer Perform, raising the price target to $210 from $187.
This new target implies a potential upside of 22% from the current trading price, reflecting strong confidence in the bank’s future performance.
Wolfe Research’s upgrade is primarily driven by M&T Bank’s superior net interest margins (NIMs).
In the second quarter, the bank reported a NIM of 3.59%, up from 3.52% in the first quarter.
Wolfe projects this margin to improve further, estimating a NIM of 3.67% for 2025 and 3.72% for 2026.
These figures significantly surpass the mid-cap bank averages of 3.07% and 3.15% for the respective years.
The bank’s higher noninterest-bearing deposit mix, approximately 280 basis points above peers, contributes to its robust NIM advantage.
M&T Bank stock: diverse analyst opinions
Following Wolfe Research’s optimistic stance, other analysts have weighed in with their perspectives on M&T Bank.
On October 2, Evercore ISI upgraded the stock to Outperform from In Line, citing easing concerns over commercial real estate (CRE) credit pressures and improving fundamentals.
Analyst John Pancari highlighted that the Federal Reserve’s recent rate cut helps reduce pressure from CRE, potentially benefiting the bank’s earnings resilience through fixed asset repricing and funding flexibility.
Evercore also expects an acceleration in M&T Bank’s stock repurchase programs.
Contrastingly, Wells Fargo Equity Research downgraded M&T Bank to Underweight from Equal Weight on August 15.
Analyst Mike Mayo expressed concerns that a lower interest-rate environment could negatively impact the bank’s net interest income.
He noted that M&T Bank is more exposed to lower rates due to its focus on net interest income and its higher exposure to commercial real estate, coupled with increased competition in its primary markets.
Mixed earnings expectations ahead of Q3 report
As the third quarter earnings report approaches, the consensus among 14 Wall Street analysts is for M&T Bank to report GAAP earnings per share of $3.64 on revenue of $2.32 billion.
This compares to GAAP EPS of $4 on revenue of $2.06 billion in the same quarter last year.
Notably, 9 out of the 14 analysts have revised their EPS estimates downward in the last 90 days, indicating cautious expectations amid a challenging economic environment.
In the second quarter, M&T Bank delivered solid results with an EPS of $3.79, surpassing consensus estimates by $0.28.
The bank’s net interest income increased by $39 million to $1.73 billion, benefiting from stable NIM and higher yields on investment securities.
Nonaccrual loans decreased by $300 million from the previous quarter, signaling improved credit quality.
This decline was aided by favorable resolutions of CRE loans, including unexpected payoffs that also contributed positively to net interest income.
M&T Bank: deposit base remains stable
M&T Bank’s deposit base remained relatively stable, with deposits totaling $163.5 billion, down just $600 million from the previous quarter.
The bank has managed to keep deposit costs flat at 2.06%, despite a $900 million decline in noninterest-bearing deposits.
Its loan portfolio grew by $800 million, with growth focused on business loans while reducing exposure to commercial real estate.
The bank’s investment securities portfolio increased by $1.1 billion to $29.7 billion, with yields improving due to higher interest rates.
The bank is well-capitalized, boasting a common equity tier 1 (CET1) capital ratio of 11.4%.
This strong capital position provides a buffer against potential credit risks and offers flexibility for future growth initiatives or shareholder returns.
There is scope for $400 million in share buybacks in the second half of the year, and the bank offers a dividend yield of approximately 3.27%.
M&T Bank stock: valuation metrics indicate fair pricing
With an estimated earnings power of $15 to $15.50 per share, M&T Bank trades at a price-to-earnings multiple of about 12 times.
This valuation is in line with peers such as Fifth Third Bank and slightly higher than some others like KeyCorp.
While the bank’s improving deposit mix and strong net interest margins are favorable, concerns about potential credit risks and exposure to lower interest rates suggest that further multiple expansion may be limited without a reacceleration of economic growth.
The regional banking sector has faced challenges following recent bank failures and increased regulatory scrutiny.
M&T Bank has demonstrated resilience, maintaining profitability and a stable deposit base.
However, ongoing concerns about the commercial real estate market and the potential impact of lower interest rates on net interest income warrant careful monitoring.
Now, let’s turn our attention to the technical aspects to gauge what the charts indicate about M&T Bank’s potential price trajectory.
MTB: trading close to long-term resistance
Shares of M&T Bank saw a significant decline from $170 levels to $110 levels in 2023, but have recouped all those losses this year as they trade up by 25% year-to-date.
Source: TradingView
Although the stock is still displaying strong upward momentum on the long-term and medium-term charts, it is trading close to its long-term resistance levels near $190.
Hence investors with a bullish outlook on the stock like analysts at Wolfe Research should only open a small long position at current levels if they didn’t buy it at lower levels.
They can boost their holdings once the stock gives a daily closing above $192.
With the stock having seen a significant rally without any meaningful retracement, chances of one happening soon are also high.
Hence short-term traders who want to bet on that retracement can take a low-risk trade by going shorting the stock near $175 with a stop loss of $193.2.
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