M&T's profit aided by lower expenses, higher interest rates

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Higher interest rates and a drop in legal and other expenses drove third-quarter profit higher at M&T Bank in Buffalo, N.Y.

The $116.8 billion-asset company’s net income rose 50% from a year earlier to $505 million. Earnings per share of $3.53 were 18 cents higher than the mean estimate of analysts compiled by FactSet Research Systems.

Net interest income after a loan-loss provision increased 9% to $1 billion. The provision fell 47% to $16 million. Yields on average earning assets widened 51 basis points to 4.4%. The net interest margin improved 35 basis points to 3.88%.

“Growth in net interest income, fueled by a wider net interest margin, reduced credit costs and controlled operating expenses led to an 8% rise in diluted earnings per common share compared with the second quarter,” Chief Financial Officer Darren King said in a news release Wednesday.

Total loans and leases fell 1.3% to $86.7 billion on repayments of acquired residential mortgages. Commercial real estate loans rose 2% to $33.5 billion. Commercial and industrial loans were little changed at $21.6 billion.

Noninterest income was unchanged at $459 million. Income from the bank’s Wilmington Trust unit increased 7% to $133 million. But that was offset by a 9% decline in mortgage banking revenue, to $88 million, and $3 million in valuation losses on equity securities.

Noninterest expense dropped 4% to $776 million on lower legal costs and deposit insurance assessments. The legal expenses fell because M&T had set aside $50 million in the third quarter of 2017 tied to a federal probe of alleged loan fraud at its Wilmington Trust unit; that matter has since been settled.

Additionally, income taxes fell 24% to $170 million. Those factors combined to help M&T’s efficiency ratio improve from 56% to 51.4%.

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