M&T(US:MTB)2024-04-15 15:59Financial Data and Key Metrics Changes - The first quarter saw a solid PPNR of $891 million, with diluted GAAP earnings per share at $3.02, and adjusted diluted earnings per share at $3.15 excluding the FDIC special assessment [2][12] - The CET1 ratio increased to 11.07% at the end of the first quarter, and tangible book value per share grew 1% to $99.54 [2][19] - Noninterest income was $580 million, slightly up from the linked quarter, but excluding a distribution from Bayview Lending Group, it declined [11] Business Line Data and Key Metrics Changes - Average loans and leases increased 1% to $133.8 billion, driven by growth in C&I and consumer loans, while declines were noted in CRE and residential mortgages [5][12] - Loan yields decreased 1% to 6.32%, but increased 2 basis points sequentially when excluding cash flow hedges [6] - Noninterest expenses were $1.4 billion, with adjusted noninterest expense increasing by 0.6% compared to the previous year [12] Market Data and Key Metrics Changes - Average investment securities increased by $1.1 billion to $28.6 billion, reflecting a shift of cash balances into investment securities [4][7] - Average total deposits declined by $648 million to $164.1 billion, with average customer deposits increasing sequentially [8][10] - The cost of interest-bearing deposits increased by 3 basis points to 2.93%, the smallest quarterly increase since early 2022 [10] Company Strategy and Development Direction - The company is focused on controlling expenses and maintaining strong liquidity, with a strategy to grow customer deposits [12][22] - The management emphasized the importance of organic growth and building new customer relationships, with share repurchases on hold until reassessment after the second quarter [22][23] - The outlook for net interest income (NII) is positive, with expectations of $6.8 billion, reflecting a neutral stance on interest rates [20][30] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the economic outlook, noting a strong labor market despite challenges [20] - There is an expectation for minimal impact on the CRE portfolio even with potential rate increases, as most loans are fixed-rate [64] - The management highlighted a conservative approach to capital management and liquidity, aiming to navigate economic uncertainties effectively [22][70] Other Important Information - The company is actively managing criticized loans, with a focus on working with clients to mitigate risks [52][96] - The management noted a reduction in criticized CRE balances, indicating improved performance in most property types [98][100] - The company is undergoing a review of its construction portfolio, with limited incremental downgrades expected [18] Q&A Session Summary Question: Can you unpack the NII guidance in a higher for longer rate environment? - Management indicated comfort with achieving $6.8 billion in NII regardless of rate cuts, citing strong deposit performance and loan growth [30] Question: What is the rationale for increasing liquidity levels? - Management stated that increased liquidity is a conservative measure in response to industry uncertainties, aiming to maintain strong capital [34] Question: How do criticized loan levels compare to past peaks? - Management acknowledged higher criticized levels but emphasized a conservative approach to credit management, aiming to support clients through stress [39][52] Question: What is the outlook for commercial real estate? - Management noted stabilization in the CRE portfolio, with ongoing monitoring and support for clients in troubled sectors [46][96] Question: How does the company plan to address S&P's negative outlook? - Management expressed confidence in managing CRE exposure and criticized loans, believing that strategies in place will mitigate risks [95][96]