M&T says it's turning the corner on commercial real estate

• Key insight: Commercial real estate loan exposure has been a headache for many banks in recent years, as office property values flailed and interest rates rapidly rose in 2022 and 2023.
• Supporting data: The bank's approval rates for commercial real estate loans have doubled compared with recent quarters, said the company's chief financial officer.
• Forward look: M&T is eyeing a potential turning point in the first quarter of 2026, anticipating that CRE loan growth will resume around that time.

M&T Bank may finally stop pruning its commercial real estate loan book in the new year, making way for loan growth that has long been stymied by efforts to shrink the bank's exposure to the problematic CRE sector.

The Buffalo, New York-based company is beginning to log a rebound in commercial real estate loan production, Chief Financial Officer Daryl Bible said Thursday during M&T's third-quarter earnings call.

M&T's approval rates for CRE loans have doubled compared with recent quarters, Bible said. After the bank implemented new systems and processes earlier this year, workflows for commercial and business loans have been flowing more smoothly, he added.

"I think the momentum is growing, and we're having a lot more success and a lot more wins and seeing more loans on the books," Bible said.

The company pulled in net income of $792 million, or $4.82 of diluted earnings per common share, in the third quarter, beating consensus analyst estimates of $4.43.

Following years of working to pare down its CRE lending portfolio, an asset class that was a bane of the banking industry in recent years, M&T may see that book of loans bottom in the first quarter of 2026, or sooner "if we get fortunate," Bible said.

M&T's total CRE book has shrunk by nearly $5 billion in the last year, to $24.3 billion. The portfolio volume has nearly halved in the last three years.

During the third quarter, CRE loans at M&T declined by 4%, as the $211 billion-asset bank continued to run off lower-yielding debt that was made before interest rates rapidly rose in 2022 and 2023, especially in the office sector.

But Bible said M&T is also still originating CRE loans, and doing so at better terms than in the low-rate era. The loans are primarily in the multifamily and industrial sectors, with some additional business in retail, hotel and health care.

M&T's total loans grew for a second quarter in a row, to $137 billion, up 1% from the prior year.

Bible said the loan origination environment has remained competitive. Loan spreads at M&T are down some 10 to 15 basis points from the prior quarter, he said, but the company "can still get our returns with this pricing."

Consumer and residential real estate loans each rose by 3% during the third quarter. Commercial and industrial borrowing was up 1%, driven by the finance and insurance sectors.

The bank also saw gains in a trendy lending business that has been on the risk watchlist of federal regulators, JPMorganChase CEO Jamie Dimon and other industry participants.

Lending to non-depository financial institutions has exploded at banks in recent years. In roughly the first half of 2025, loans to nonbanks drove about half of all bank loan growth, according to a study by Truist Securities.

Loans to non-depository financial institutions make up about 8% of M&T's loan book, Bible said Thursday. Specifically, the company's fund banking business, which provides capital call lines to entities like private equity firms, has helped M&T grow loans throughout the year, he added

The company is also one of the top Small Business Administration lenders by volume, Bible said, but the government shutdown has for now put a pin in SBA business.

Bible said that the tax legislation passed this summer "removed one source of uncertainty, and gave businesses more incentive to invest in new capital." But despite stronger consumer spending and businesses' strategic planning, M&T is on the lookout for signs that the economy is softening, he added.

"Although overall economic activity was resilient, we remain attuned to the risk of the slowdown in coming quarters due to the weakening labor market," Bible said. "The possibility of declining jobs or the rise in the unemployment rate would likely cause weaknesses in consumer spending and possibly business [capital expenditures] too."

Acquisition prospects

M&T, which has been an active acquirer in the last decade, may also look to buy a bank, Bible said, especially if it's based in one of the 12 states where M&T operates, primarily around the Northeast.

"Our strategy is really to continue to grow share and customers in the markets that we serve," Bible said. "So I'm sure an acquisition will come at some point down the road, I'm not sure when that's going to be."

Merger and acquisition activity among banks has been on a tear in 2025, particularly in recent months, after a yearslong slowdown.

M&T's latest acquisition closed in 2022. Its purchase of People's United Financial grew its assets by some $50 billion and extended its footprint across New England.