On Tuesday, Keefe, Bruyette & Woods adjusted its price target on shares of M&T Bank (NYSE:MTB), moving it up to $170 from the previous $162, while maintaining a Market Perform rating on the stock. The firm's decision comes after evaluating the bank's recent financial performance.
M&T Bank's latest quarterly results presented a complex picture, marked by an operating miss due to higher credit costs and a dip in Net Interest Income (NII). Despite these challenges, the bank managed to surpass Pre-Provision Net Revenue (PPNR) expectations by $0.03, attributed to lower than anticipated expenses.
The increase in credit costs was primarily driven by a reserve build following a 6% rise in nonaccrual loans. Nevertheless, the bank's stock saw an over 4% increase, which analysts believe was aided by a 3% reduction in Commercial Real Estate (CRE) criticized loans. Additionally, M&T Bank revised its NII guidance upwards, now projecting over $6.8 billion, a slight increase from the previous range of $6.7 to $6.8 billion.
The updated guidance on NII, despite not being expected to significantly alter the consensus, provides better visibility for the bank's financial outlook. Along with the improvement in CRE loans, these factors are anticipated to contribute to the continued appreciation of M&T Bank's shares. Notably, the stock is currently trading at a 4% discount compared to its peers based on 2025 estimates, signaling potential room for growth.
InvestingPro Insights
M&T Bank (NYSE:MTB), with its notable history of raising dividends, has demonstrated a commitment to shareholder returns, maintaining payments for an impressive 46 consecutive years. This consistency is reflected in its current dividend yield of 3.7%, which is particularly attractive to income-focused investors. Additionally, the bank's valuation metrics present an interesting picture; it trades at a P/E ratio of 9.25, which is low relative to its near-term earnings growth, suggesting that the stock may be undervalued. This is further supported by a PEG ratio of just 0.24 for the last twelve months as of Q4 2023, indicating that the bank's earnings growth could outpace its share price.
While analysts have revised their earnings downwards for the upcoming period, it's worth noting that M&T Bank is still expected to be profitable this year, a testament to its financial resilience. Furthermore, with a price that is 94.83% of its 52-week high and an analyst target fair value of $160, the stock may have room to appreciate. For those interested in a deeper dive into the bank's prospects, InvestingPro offers additional insights and metrics, including more InvestingPro Tips to inform your investment decisions. Remember to use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of actionable data and analytics available.
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