M&T(US:MTB)2024-01-18 20:46Financial Data and Key Metrics Changes - For the full year 2023, the company generated pre-tax pre-provision revenue (PPNR) of $4.2 billion, up 22% from 2022, with a positive operating leverage of 3.9% [5] - Diluted GAAP earnings per common share for Q4 2023 were $2.74, and adjusted diluted earnings per common share were $3.62, excluding the FDIC special assessment [16] - The net interest margin decreased to 3.61%, down 18 basis points from the linked quarter, primarily due to an unfavorable deposit mix shift and higher rates on customer deposit funding [44] Business Line Data and Key Metrics Changes - Average loans and leases increased slightly, with growth in commercial and industrial (C&I) and consumer loans, while declines were noted in commercial real estate (CRE) and residential mortgage loans [7] - Non-interest income for Q4 was $578 million, up 3% sequentially, driven by strong commercial mortgage banking revenues and higher trust income [8] - Non-accrual loans decreased by $176 million from the linked quarter to $2.2 billion, with a non-accrual ratio of 1.62% [9] Market Data and Key Metrics Changes - Average deposits grew by $2 billion to $164.7 billion, with a decline in average demand deposits reflecting a shift towards higher-yielding products [18] - The company expects average deposits in 2024 to be in the range of $163 billion to $165 billion, focusing on growing customer deposits at a reasonable cost [52] Company Strategy and Development Direction - The company aims to leverage strong capital and liquidity levels to grow new customer accounts while reducing asset sensitivity [15] - There is a focus on optimizing resources for expense savings and revenue generation, particularly in the New England and Long Island markets [26] - The integration of People’s United is complete, and the company is confident in realizing potential post-merger benefits [30] Management's Comments on Operating Environment and Future Outlook - Management anticipates a soft landing scenario for the economy, with potential for mild recession due to the lagged impact of rate hikes [50] - The outlook for net interest income is projected to be in the range of $6.7 billion to $6.8 billion, reflecting the impact of higher deposit funding costs [51] - The company expects net charge-offs for the full year to be near 40 basis points, indicating ongoing credit cost normalization [54] Other Important Information - The company’s CET1 ratio at the end of 2023 was estimated at 10.98%, reflecting strong capital generation [22] - Non-interest expenses for Q4 were $1.45 billion, down 2% from the linked quarter, with an adjusted efficiency ratio of 53.6% [46] - The company has made enhancements to financial reporting, including reclassifying owner-occupied loans to better align with management practices [29] Q&A Session Summary Question: What is the comfortable level of CET1 on a long-term basis? - Management indicated a preference to operate with a buffer of 50 to 100 basis points over regulatory requirements [32] Question: Can the company maintain a long-term track record of lower credit losses despite increases in criticized loans? - Management expressed confidence, noting that increases in criticized loans are primarily interest rate driven and that overall performance remains strong [34] Question: What is the outlook for net interest income given potential rate cuts? - Management expects net interest income to stabilize and potentially grow in the second half of the year, depending on rate cuts [38] Question: What is the appetite for bank acquisitions in the next 12 to 18 months? - Management stated that while there is a focus on organic growth, they remain open to acquisition opportunities if they align with strategic goals [75] Question: How does the company view the current state of criticized loans? - Management noted that the increase in criticized loans is largely a reflection of market conditions rather than changes in underwriting standards [82]