M&T Bank Corp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Manan Gosalia - Morgan Stanley - Analyst : Hey, good morning. Daryl.

Question: Manan Gosalia - Morgan Stanley - Analyst : So, I wanted to ask on NII. So you beat on NII this quarter and then your new guide for NII implies that quarterly NII will be relatively flat from 2Q levels and you did see a noticeable increase quarter on quarter -- this quarter NII. So can you just unpack the drivers in the back half? Is there some conservatism baked in there? Or is there some timing difference in being neutral to rates, but maybe perhaps being a little bit more asset-sensitive with the first rate cut, if you can just unpack those drivers there?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. And just to confirm, that five basis points is where you are above normal, right. The five basis points is the total impact.

Question: Manan Gosalia - Morgan Stanley - Analyst : And your five basis points above that? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 18, 2024 / 12:00PM, MTB.N - Q2 2024 M&T Bank Corp Earnings Call

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. All right, perfect. And then maybe (inaudible) position in the category of no good deed goes unpunished. But on the buyback resumption, your message in the deck is that capital level should at least stay at current levels of around 11.5%, just given that the SCB went lower, given the excess capital position, what do you need to see before you accelerate the pace of buybacks and bring that capital ratio lower?

Question: Manan Gosalia - Morgan Stanley - Analyst : Great. Thank you.

Question: Matt O'Connor - Deutsche Bank AG - Analyst : Good morning. (multiple speakers) elaborate -- morning, the big drop in the commercial real estate on a period-end basis. I think it's down about 9%, obviously a great job bringing that down. And I know you touched on some of the kind of opportunities to offload that, but it's just a bigger drop than I would have thought. And I don't know if there's any reclass into C&I as you kind of improve some of those like guarantees and things like that. So just elaborate on that in terms of how you're able to bring it down so much. Thank you.

Question: Matt O'Connor - Deutsche Bank AG - Analyst : Okay, that makes sense. I think that's how others do that, too. And then just separately on the all other income line, you plan to a couple of kind of positives there. Is that a sustainable level or I know it can be lumpy, but how do you think about all other fees of [152], thanks.

Question: Matt O'Connor - Deutsche Bank AG - Analyst : Okay. Thank you so much.

Question: Erika Najarian - UBS Investment Bank - Analyst : Hi, two follow-up questions, please. Daryl company clearly did a great job in terms of interest bearing deposit costs coming down. I know some of that is a mix of brokers being actively taken down in terms of exposure. Could you give us a sense of before the rate cut and we appreciate the downside beta guide that you gave us but B, if we don't rate cuts, how do you feel like this level of progress is sustainable and maybe break it down in terms of what you're observing with credit and deposit rates versus the continued runoff in brokered CDs? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 18, 2024 / 12:00PM, MTB.N - Q2 2024 M&T Bank Corp Earnings Call

Question: Erika Najarian - UBS Investment Bank - Analyst : Thank you. And my second question is a follow up to Manon. So last quarter and during the quarter, I think you guys are telling us, don't back into this 11% CET1 when you're thinking about buybacks, listen to what we're saying on the total amount of what we're buying back. And then, of course, you had a pretty strong progress in terms of CET1 this quarter and the floor went up even more. And I appreciate your response to Manon question, and I know that's part of the conservatism of this company and why long-only value you guys so highly, I guess I'm wondering how should we think about the future. I get that there's still uncertainty there still a willingness, a desire to take down CRE concentration desire to see the economy play out. But at this level of earnings power with $200 million you're going to continue to build capital, especially if the C&I loan growth is in golf by CRE declines. So I guess as we as your long-term shareholders think about what forget buybacks for a second returns and what that appropriate capital floor is, how would you help them frame that Daryl?

Question: Erika Najarian - UBS Investment Bank - Analyst : So I guess in comparatively, how Jamie says it, I guess, the better way for your shareholders to think about is earnings in store (laughter) Perfect. Thanks, guys.

Question: John Pancari - Evercore ISI Institutional Equities - Analyst : Good morning, Daryl.

Question: John Pancari - Evercore ISI Institutional Equities - Analyst : On the back to see our rating. I know you mentioned the ongoing focus to reduce the concentration of CRE. Where do you see the CRE to risk-based capital percentage go in and believe in the past you've indicated you wanted to feed into the 150% range. So when we get that update and then separately, in terms of the improvement that you saw in credit this quarter in terms of the past-due declines, nonaccruals and the criticized. Can you just talk about what specifically you saw that is driving that and broadly, those trends could continue in that direction? Thanks.

Question: John Pancari - Evercore ISI Institutional Equities - Analyst : Great. Thanks to all of that helps. And then related to that, maybe could you just talk about the role that loan modifications have played here as you've addressed commercial real estate, maybe help us with the trajectory of your financial difficulty modifications may continue to rise? And maybe if you could just talk about the concerns out there that there's simply kicking the can down the road and we are a year from now, we can see these pressures reared its ugly head again.

Question: John Pancari - Evercore ISI Institutional Equities - Analyst : Great. Thanks, Darryl.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Hey Daryl. Good morning.

Question: Ebrahim Poonawala - BofA Securities - Analyst : I just wanted to go back to the criticized C&I and CRE. So a lot of decision making on capital revolves around how some of this plays out. If you don't mind, give us a sense of how you think about criticized loans if rates go lower, I think you mentioned soft landing base case, probably the most likely feel. Is there a point in time if rates are lower, you get the financials maybe in March of next year, we could see a meaningful reset lower from this $12 billion going down by a couple of billion. Like I'm just wondering, could there be a step function decline in criticized loans at some point in the first half of next year based on rates and macro clarity?

Question: Ebrahim Poonawala - BofA Securities - Analyst : That's helpful. And I guess the other question on CRE, given all the work you've done over the past year, stress testing, et cetera, on the CRE book. Just give us your perspective on the loss content in these loans as they maybe some of these go into non-accrual based on what you know today, what's already been reserved? And as we think about net charge-offs relative to the 40 bps that you've guided for this year? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 18, 2024 / 12:00PM, MTB.N - Q2 2024 M&T Bank Corp Earnings Call

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. That's great color. Thanks, Daryl.

Question: Ken Usdin - Jefferies LLC - Analyst : Thanks. Good morning, hey Daryl, your great amount of securities repricing this quarter of 31 basis points on a bigger book. And I can imagine some of that was just a switch from cash, but I think you had talked about 15 to 20 going forward. So maybe can you just give us a little bit color on what drove that 31 and then how you're looking at what securities yields could look like from an incremental perspective going forward? Thanks.

Question: Ken Usdin - Jefferies LLC - Analyst : Okay. And then you're obviously for a long time, M&T has had a really healthy amount of cash. And I think cash and earning assets together is about a cash, it's like 30 something percent, still low 30%. And do you still anticipate given that conservatism keeping cash and securities at over 30% as you look forward? And what would change that if anything?

Question: Ken Usdin - Jefferies LLC - Analyst : Okay. Thanks, Daryl.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Hi Daryl.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : You obviously did a good job with the [D fast] and the stress capital buffer coming down. I guess a couple of questions. First when you look at the improvement and you touched on it, what you've obviously done, do you think that improvement can be as large next year as you guys continue to reduce these risks to M&T as we look out into 2025?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Got it. And then when you look at M&T's history, obviously the organic growth has always been complemented very successfully with acquisitions. And when you look out over the landscape over the next 12 to 24 months. Can you give us your views on depository acquisitions, it's not to say that you're going to do anything near term, but just how are you guys thinking about depository acquisitions? I know there's changes and we got a presidential election coming up, which could influence as well. But what do you guys been thinking in that strategy.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Great. Thank you.

Question: Chris Saphr - Wells Fargo Securities, LLC - Analyst : Good morning. So my question is just a little bit on expenses, the funding about headcount, what you're thinking about it going forward since salaries expenses were up 4% year over year, which seems pretty good overall.

Question: Chris Saphr - Wells Fargo Securities, LLC - Analyst : And just to clarify down a couple of hundred, not a couple of $100 million, correct?

Question: Chris Saphr - Wells Fargo Securities, LLC - Analyst : No worries. And then just on the outside data processing, a big delta in how much is that related to this upgrade that you've been talking about and will some of that runoff? Are you kind of now at a higher operating plateau on tech expense?

Question: Chris Saphr - Wells Fargo Securities, LLC - Analyst : All right. Thank you.