M&T Bank Corp Q3 2024 Earnings Call Transcript

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

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Hi, Daryl. How are you?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Good. Thank you. Daryl, over the years, M&T has done a great job in managing their capital and returning excess capital to shareholders. You pointed out today that your CET1 ratio is a very strong 11.5%, and you have the buyback going on again in the fourth quarter. Can you share with us where do you think the CET1 ratio is at an optimal level? And to get there, could you increase the share repurchases as you go forward into 2025? And once we also get the final Basel III endgame, do you guys know what to expect?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Very good. Very helpful. And then as a follow-up -- and I'm not asking for '25 guidance because I know that won't come until possibly January. But it looks like your net interest income has troughed. It looks like the first quarter, based upon slide 9, that net interest income bottomed. And you're gradually growing out net interest income and the margins obviously expanding. If the forward curve is correct and if the Fed -- and I know these are big ifs. But if the forward curve is correct and the Fed is correct in that it's going to lower the Fed funds rate, possibly, to 3 to 3.5% by the end of next year and we get a positive slope in the curve, can you kind of frame out -- should this growth that you're seeing continue and possibly accelerate in 2025, just based -- aside from growing your balance sheet -- but just based on interest rates?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Very good. Very helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, MTB.N - Q3 2024 M&T Bank Corp Earnings Call

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Good morning, Daryl.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Just question on -- you mentioned the criticized loans' declined. I'm just wondering, do we need rates to go much lower for CRE criticized loans to come down over the coming quarters? And could we see a big, like, stair-step decline at some point early next year when you -- I don't know -- get updated appraisals, financials from these borrowers? And what are the implications? Does it really change your thought process as a result on the 11% CET1 or where the reserve ratio is today at 1.60?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Understood. And just maybe, Daryl, so you mentioned drivers of loan growth. You had pretty good C&I growth the last few quarters. Is this still coming through partly driven by the People's acquisition and kind of the footprint you acquired there? And are we done with the runoff in CRE? Could that kind of flatline from here, or is that still going to be declining somewhat from third-quarter levels?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : And just one follow-up on the previous response you gave to Gerard. If we don't get a rate cut in the fourth quarter in November, December, or at least one of those, does that change your outlook on the NII and NIM from here?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : That's helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, MTB.N - Q3 2024 M&T Bank Corp Earnings Call

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

Question: Manan Gosalia - Morgan Stanley - Analyst : So I wanted to ask on deposit betas. I think you noted that you're assuming a 40% deposit beta in 4Q. Now, deposit betas on the way up are closer to the mid-50s, if I recall correctly. So do you expect that betas will accelerate from 4Q as you go into next year and as we see more rate cuts, and get closer to the betas that you saw on the way up?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. And then just in terms of the loan growth you were just speaking about, as we get into next year, I mean, it sounds like loan growth will accelerate as you start to build those CRE loans. In terms of funding that loan growth, do you expect to grow deposits in line with loan growth next year, or is there room to bring down the cash balances? I noticed that they didn't go down that much this quarter. Is there some room to utilize cash balances and maybe grow deposits a little bit slower next year?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. So it sounds like that core deposits continue to grow. You'll pay down some of the non-core funding. And would the securities balances grow as well as you move away from cash, or would you expect to stay at this level of cash?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. Thank you.

Question: Christopher Spahr - Wells Fargo Securities, LLC - Analyst : Thank you. Good morning. So just a question on the loans (technical difficulty)

Question: Christopher Spahr - Wells Fargo Securities, LLC - Analyst : Apologies. Can you hear me better now, or is this still bad?

Question: Christopher Spahr - Wells Fargo Securities, LLC - Analyst : Okay. Sorry about that. Just for the loans in the fourth quarter relative to period end of $136 billion, is there upside to that if CRE stabilizes, or do you see some more runoff and paydowns in that portfolio and then stabilizing into 2025?

Question: Christopher Spahr - Wells Fargo Securities, LLC - Analyst : Okay. And then during the quarter, you said that a 200-basis-point lower in rates could actually effectively wipe out the criticized loans in the CRE. Do I have that correct? And if so, then just kind of getting back to the earlier questions, like the timing, is it that last (technical difficulty)

Question: Christopher Spahr - Wells Fargo Securities, LLC - Analyst : Sure. Apologies about the connection. What's the timing of that? If you do get 200 basis points lower in the curve, what's the timing for the benefits on the criticized CRE?

Question: Christopher Spahr - Wells Fargo Securities, LLC - Analyst : Okay, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, MTB.N - Q3 2024 M&T Bank Corp Earnings Call

Question: Dave Rochester - Compass Point Research & Trading LLC - Analyst : Hey, good morning, guys. Nice quarter.

Question: Dave Rochester - Compass Point Research & Trading LLC - Analyst : On the deposit front, I appreciated the outlook on the beta, that 40% you mentioned. I was curious on what your thoughts were on the

Question: Dave Rochester - Compass Point Research & Trading LLC - Analyst : Okay. Great, thanks. Switching to loan growth, appreciated all the color you gave on the drivers for 3Q. I think you mentioned those more specialty lines and that middle market utilization was actually down a little bit. When do you expect that utilization to start to move up more meaningfully? And if you could just talk about the competitive landscape within C&I overall, that'd be great.

Question: Dave Rochester - Compass Point Research & Trading LLC - Analyst : Great, thank you.

Question: Frank Schiraldi - Piper Sandler Companies - Analyst : Morning, Daryl.

Question: Frank Schiraldi - Piper Sandler Companies - Analyst : I know there's -- I guess, just one last one on loan growth. I mean, I know there's a lot of moving parts here. You mentioned the $136 billion in average for next quarter, which would be sort of 1% growth linked quarter. Do you think that's a pretty good bogey even going forward from there, as you talk about pipelines building -- maybe [CREA] has a couple more quarters to trough. Is that a decent bogey, or do you think you could see quarterly growth maybe even accelerate from that sort of 1% linked quarter unannualized number?

Question: Frank Schiraldi - Piper Sandler Companies - Analyst : Okay. Fair enough. And then you also talked about the repricing of the back book. And I think you just mentioned, on the security side, where you think yield could get to. If we -- just for modeling purposes, we think about the loan book repricing. You set aside rate movements for a minute -- and just -- any sort of color you can give in terms of where we sit now, which rates where they are currently, what you're seeing, or what the sort of pickup is on a quarterly basis on loan yields from the repricing of the back book?

Question: Frank Schiraldi - Piper Sandler Companies - Analyst : Great. Okay. Thanks for the color.

Question: John Pancari - Evercore ISI - Analyst : Morning, Daryl.

Question: John Pancari - Evercore ISI - Analyst : In terms of expenses, I mean, you put up some pretty good operating leverage this quarter. It looks like your outlook implies some continued positive operating leverage near term. Could you give us your thoughts as you look into 2025, what type of acceleration in that positive operating leverage is possible? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, MTB.N - Q3 2024 M&T Bank Corp Earnings Call I believe, right now, the Street's looking at about 150- to 200-basis-point positive operating leverage for you guys as we look into the full-year '25. Curious in your thoughts on what you believe is achievable.

Question: John Pancari - Evercore ISI - Analyst : Great. All right. Thank you. That's helpful. And then on the credit side, your loan loss reserve ratio as a percentage of loans ticked down a bit or so this quarter. I guess, they're around 162 basis points where it stands now. Where do you see that trending here? You cited the expected decline in criticized that you'll see in the quarter and then a pretty good trajectory there. Fair to assume continued modest decline here in that ratio. Is that fair to assume as you look out?

Question: John Pancari - Evercore ISI - Analyst : Thanks, Daryl. Very helpful.

Question: Nathan Stein - Deutsche Bank Securities Inc. - Analyst : Hey, all. This is Nathan Stein on behalf of Matt O'Connor. I wanted to ask about the NIM trajectory, given it came in strong this quarter at 3.62%, and you expect it to be low 360s next quarter. So this is above your prior guide to be in the high 350s in the second half of the year. In September, I think you'd said a 360-range NIM makes sense for next year. Have your thoughts changed regarding the NIM trajectory, given how strong it's been to date?

Question: Nathan Stein - Deutsche Bank Securities Inc. - Analyst : Okay, great. And then kind of a nuanced question, but other revenue was in line with 2Q levels. And I think you previously suggested it would come down a bit on lower syndication revenues and interchange fees. Did those come in a bit better than you'd expected, or was it something else that kind of helped these? And then how do you expect this fee line to trend going forward?

Question: Nathan Stein - Deutsche Bank Securities Inc. - Analyst : Thank you.

Question: Zach Westerlind - UBS - Analyst : Good morning, this is Zach on for Erika. I just had a quick follow-up on the expense question. And then you mentioned that there were some projects that are going to hit in the fourth quarter. Can you just clarify if those are kind of one-time-type projects, or is that expected to stay in the run rate?

Question: Zach Westerlind - UBS - Analyst : Helpful. Appreciate that. And then just on the credit front, clearly, you guys have made a bunch of progress with better -- net charge-offs trending down, credit quality trends looking pretty good. Can you just remind us how you think about like a through-the-cycle charge-off number, if you're able to kind of share your thoughts around that?

Question: Zach Westerlind - UBS - Analyst : Got it. Thanks for taking my questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 12:00PM, MTB.N - Q3 2024 M&T Bank Corp Earnings Call