On Wednesday, M&T Bank Corporation (NYSE:MTB) received an upgrade from Evercore ISI, shifting its stock rating from In Line to Outperform. The firm also raised the price target for M&T Bank shares to $210.00, up from the previous target of $187.00.
The upgrade was attributed to expectations of diminishing commercial real estate (CRE) credit concerns, improving fundamentals, and an accelerating capital return, which could contribute to an increase in the stock's valuation. The bank has shown recent outperformance, which analysts believe could be sustained due to a potential favorable shift in the bank's fundamentals, supporting a more positive earnings outlook.
Analysts highlighted that M&T Bank's earnings might be more resilient than anticipated, aided by fixed asset repricing, funding flexibility, and earnings accretion from recent acquisitions. Despite ongoing CRE credit concerns, the declining rate environment is seen as positive for refinancing capabilities, credit migration, and containing loss content. Additionally, M&T Bank has strengthened its credit reserves and does not anticipate a significant reduction in CRE loan balances.
The resumption and expected acceleration of share buybacks are also seen as factors that will support the long-term upside to M&T Bank's return on tangible common equity (ROTCE). Although the stock has outperformed year-to-date, it is trading at a multiple that is in line with peers, at 10.7 times the estimated 2025 earnings per share (EPS) and 1.7 times the tangible book value (TBV). This is despite M&T Bank's ROTCE outlook being modestly above peers and a more favorable earnings trajectory.
The bank also currently trades at a discount to its pre-pandemic price-to-earnings (P/E) ratio of 14 times. As fundamentals improve, returns strengthen, and credit risk diminishes, analysts from Evercore ISI foresee additional upside to M&T Bank's relative valuation.
In other recent news, M&T Bank has been the focus of positive analyst outlooks due to strong financial performance and unique growth opportunities. Both JPMorgan and Piper Sandler upgraded their price targets for the bank, citing factors such as stable net interest margins, improving credit metrics, and potential for increased share buybacks. JPMorgan further emphasized M&T Bank's strong organic growth, comparing favorably with its peers.
Recent earnings reports reveal M&T Bank's second-quarter 2024 GAAP earnings per share at $3.73, with net income reaching $655 million. Revenue growth was driven by both fee income and net interest income. The bank also announced plans to resume share repurchases in the second half of 2024.
M&T Bank's commitment to sustainability is reflected in its sustainability finance loans and investments reaching $3.1 billion. The bank has also been recognized for its services, winning awards for its mobile banking app and being named Securitization Trustee of the Year. Despite a decrease in commercial real estate loans, M&T Bank saw growth in average loans and leases, largely driven by commercial and industrial and consumer loans.
The bank projects its net interest income for the year to be between $6.85 billion and $6.9 billion, and plans share repurchases at a pace of $200 million per quarter.
InvestingPro Insights
To complement the analysis provided by Evercore ISI, recent data from InvestingPro offers additional context on M&T Bank's financial position and market performance. The bank's market capitalization stands at $28.84 billion, with a P/E ratio of 12.84, slightly lower than its pre-pandemic levels mentioned in the article. This aligns with the analysts' view that there may be room for valuation expansion.
InvestingPro Tips highlight M&T Bank's strong dividend history, having maintained dividend payments for 46 consecutive years and raised them for the past 7 years. This demonstrates the bank's commitment to shareholder returns, which is consistent with the article's mention of expected acceleration in share buybacks. The current dividend yield is 3.13%, offering an attractive income component for investors.
Despite the positive outlook, it's worth noting that M&T Bank has experienced a revenue decline, with a -8.73% growth rate over the last twelve months. However, the bank remains profitable, with analysts predicting continued profitability this year. This profitability, combined with the bank's dividend track record, may provide some reassurance to investors concerned about the commercial real estate credit risks mentioned in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 6 additional tips for M&T Bank, providing a deeper understanding of the company's financial health and market position.
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