Q4 2024 M&T Bank Corp Earnings Call
Welcome to the M&T Bank 4th Quarter and Full Year 2024 Earnings Conference Call. All lines have been placed on listen-only mode and the floor will be open for your questions following the presentation.
If you would like to ask a question at that time, please press star then the number 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.
When posing your question, we ask that you please pick up your headset to allow for optimal sound quality.
Lastly, if you should require operator assistance, please press star zero.
Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to Brian Klock, Head of Corporate Development and Investor Relations. Please go ahead.
Brian Klock: Thank you, Todd, and good morning. I'd like to thank everyone for participating in M&T's fourth quarter 2024 earnings conference call, both by telephone and through the webcast.
Brian Klock: Once there, you can click on the investor relations link and then on the events and presentations link.
Closed captioning has also been provided for webcast participants.
Speaker Change: Also, before we start, I'd like to mention that today's presentation may contain forward-looking information. Cautionary statements about this information are included in today's earnings release materials and in the investor presentation, as well as our SEC filings and other investor materials.
Speaker Change: The presentation also includes non-GAAP financial measures as identified in the earnings release and in the investor presentation.
The appropriate reconciliations to GAAP are included in the appendix.
Speaker Change: Joining me on the call this morning is M&T's Senior Executive Vice President and CFO, Daryl Bible, and I'd like to turn the call over to Daryl.
Daryl Bible: Thank you, Brian, and good morning, everyone. First, I'd like to begin with our purpose on slide three. MIT's success continues to be driven by our purpose, making a difference in people's lives.
In 2024, this impact was evident across the footprint.
Daryl Bible: In addition to the positive social, environmental and governance accomplishments highlighted on slide four, this December , M&T issued our first sustainability bond in conjunction with the publication of our sustainability, financing framework, which will guide future issuances. [inaudible]
Now let's turn to slides 7 and 8.
Daryl Bible: Before we get into the fourth quarter, I want to pause and reflect on some of the highlights for 2024.
Daryl Bible: First I want to take a moment to recognize the hard work and dedication of our 22,000 colleagues.
Daryl Bible: who allowed us to have such a successful year. In 2024, we focused on four priorities, including building our New England and Long Island markets, optimizing our resources through simplification,
Daryl Bible: Making our systems and processes resilient and scalable, and continuing to develop and scale our risk management.
Daryl Bible: The progress we made on these priorities and related enterprise initiatives will allow the bank to continue to grow and scale in coming years.
Daryl Bible: Our focus on fundamentals is reflected in several of our financial accomplishments in 2024.
Daryl Bible: We executed our financial plan for the year, and the results met or exceeded the outlook we discussed last January for NII, fee income, expenses, and average loans and deposits.
Daryl Bible: We made significant progress on our CRE concentration, reaching what we believe is a target level.
Daryl Bible: Our capital levels continue to grow through the year and remain strong as we restarted our share repurchase program in the third quarter.
Daryl Bible: We actively managed our interest rate sensitivity through our hedging program and securities portfolio to shift our balance sheet toward a more rate-neutral position.
Daryl Bible: We manage credit risk, meaningfully reducing nonaccrual and commercial criticized balances and having net charge-offs come in largely in line with our expectations.
Daryl Bible: for 2025 and beyond and is reflected in our 2024 results with net operating earnings per share of $14.88.
Daryl Bible: ROTA and ROTCE of 1.3% and 14.54% and 11% growth in tangible book value per share.
Daryl Bible: Turn to slide 9, which shows the results for the fourth quarter.
Daryl Bible: Our fourth quarter results reflect the continuation of a strong performance we have through the year.
There are several successes to highlight.
Daryl Bible: NII was largely stable compared to the third quarter, even considering 100 basis points and rate cuts since the start of the easing cycle in September.
Daryl Bible: Average total loans grew for the fifth consecutive quarter, demonstrating our ability to more than offset the planned reduction in our CRE concentration.
Daryl Bible: Average total deposits grew by over three billion sequentially while interest bearing deposit costs declined 24 basis points reflecting the quality of our deposit franchise.
Daryl Bible: We executed 200 million in share repurchases and grew CET1 ratio to 11.67%.
Daryl Bible: Asset quality continued to improve with a $1 billion reduction in commercial criticized loans and $236 million reduction in non-accrual loans. Now let's look at the specifics for the fourth quarter.
Daryl Bible: M&T's fourth quarter results produced an ROA and ROCE of 1.28% and 9.75% respectively.
Daryl Bible: The ET1 ratio remained strong, growing to 11.67% at the end of the fourth quarter, and tangible book value per share grew 1%. The fourth quarter included several notable items.
Daryl Bible: A securities gain of $18 million, or $0.08 per share, related to the sale of non-core investments.
Daryl Bible: Expense associated with redemption of certain M&T Trust Preferred Obligations amounting to $20,000,000 or $0.09 per share. This action has a three-year earn back.
Daryl Bible: The looted net operating earnings per share were $3.92 for the recent quarter, down from $4.08 in the prior quarter.
Daryl Bible: Net operating income yielded an ROTA and ROTCE at 1.35% and 14.66% for the recent quarter.
Daryl Bible: Next, we look a little deeper into the underlying trends that generated our fourth quarter results. Please turn to slide 11.
Daryl Bible: Maximal Equivalent Net Interest Income was $1.74 billion, largely unchanged from the link quarter.
Bye.
Daryl Bible: NII for the fourth quarter was $25 million in non-accrual interest compared to $12 million in the third quarter. The net interest margin was 3.58%, a decrease of four basis points from the prior quarter.
Daryl Bible: And the primary drivers of a decrease to the margin were a negative 10 basis points related to lower contribution of free funds.
Daryl Bible: Partially offset by a positive three basis points from the fixed asset, fixed rate asset repricing and a positive three basis points from higher non-accrual interest.
Daryl Bible: Turn to slide 13 to talk about average loans. Average loans and leases increased $1 billion to $135.7 billion.
Daryl Bible: CNI loans grew 2% to $60.7 billion, driven by strength in dealer commercial services, fund banking, and corporate and institutional.
CRE loans declined 4% to $27.9 billion.
Daryl Bible: CRE as a percent of Tier 1 capital and the allowance is estimated to be 136% at the end of the fourth quarter.
Residential mortgage loans were relatively unchanged at $23.1 billion.
Daryl Bible: Consumer loans grew 5% to $24 billion reflecting increases in recreational finance and indirect auto loans.
Daryl Bible: to 6.17% as lower rates on variable loans were partially offset by fixed rate loan repricing.
Daryl Bible: A smaller drag related to cash flow hedges and higher non-accrual interest.
Daryl Bible: Turning to slide 14, our liquidity remains strong. At the end of the fourth quarter investment securities and cash, including cash out at the Fed, totaled $54.8 billion, representing 26% of total assets.
Average investment securities increased $2.7 billion.
Daryl Bible: The yield on investment securities increased 18 basis points to 3.88%, as the yield on new purchases exceeded the yield on maturing securities.
Daryl Bible: In the fourth quarter, we purchased over 3.3 billion in securities at an average rate of 4.96%.
Daryl Bible: Journey to size 15, remain focused like growing customer deposits and saw a solid deposit growth in the fourth quarter [inaudible]
Daryl Bible: Average total deposits rose $3.1 billion, or 2%, to $164.6 billion, reflecting $2.6 billion increase in non-broker deposits.
Daryl Bible: Deposit growth was concentrated in commercial, business banking, and institutional services, while consumer deposits declined, reflecting lower time deposit balances.
Daryl Bible: Average non-interest bearing deposits rose $0.4 billion to $46.5 billion, primarily related to trust demand deposits within our institutional services segment.
Non-interest bearing deposits were largely staple in our other segments.
Daryl Bible: Excluding broker deposits, the average non-interest bearing deposit mix in the fourth quarter was 30.4%.
Interest bearing deposit costs decreased 24 basis points to 2.64%.
Continuing on slide 16
Daryl Bible: Non-interest income was $657 million compared to $606 million in the late quarter.
Daryl Bible: Trust income increased $5 million to $175 million from higher sales and fees in corporate trusts and agency services.
Daryl Bible: Mortgage banking revenues were $117 million compared to $109 million in the third quarter.
Daryl Bible: Commercial mortgage banking revenues were the main driver, increasing $7 million from the late quarter to $41 million, reflecting higher gains on the sale of commercial mortgage loans.
Daryl Bible: Other revenues from operation increased $24 million to $176 million from a $23 million distribution from M&T's investment in DLG.
Daryl Bible: and Strong Syndication and Other Loan and Letter of Credit Fees, which increased $5 million.
Daryl Bible: Security gains of $18 million mostly reflect the realized gains on the sale of non-core investments.
Turning to slide 17.
Daryl Bible: Non-interest expenses were $1.36 billion, an increase of $60 million from the prior quarter.
Daryl Bible: Salaries and benefits increased $15 million to $790 million, inclusive of higher incentive compensation.
Daryl Bible: reflecting the redemption of certain M&T trust-preferred obligations and expenses associated with corporate real estate optimization, partially offset by pension-related credit.
Daryl Bible: The Efficiency Ratio was 56.8% compared to 55% in the third quarter. On an adjusted basis, when excluding notable items,
The efficiency ratio was 55.3%.
Next, let's turn to slide 18 for credit. Non-interest charge-offs.
Daryl Bible: Net charge-offs for the full year were 41 basis points, which is in line with our expectations.
Daryl Bible: Non-accrual loans decreased $236 million, or 12%, to $1.7 billion. Non-accrual ratio decreased 17 basis points to 1.25%, driven largely by upgrades out of non-accrual, as well as payoffs and charge-offs.
Daryl Bible: The allowance-to-loan ratio decreased one basis point to 1.61 percent, partially related to the reduction in criticized loans, including those in nonaccrual status.
Daryl Bible: With NCNI, the decline in credit size was concentrated in services, health services, and dealer segments.
The CRE criticized the client was primarily within office.
Retail, Out Air, Hotel, and Construction
improve cash flows in many of the portfolios
Daryl Bible: that were impacted by COVID, namely healthcare, hotel and retail, and active refinance markets helped drive the improvement in CRE credit size.
Turning to slide 22 for Capital
Daryl Bible: M&T's CET1 ratio at the end of the 4th quarter was an estimated 11.67% compared to 11.54% at the end of the 3rd quarter. The increase was due to continued strong earnings net of $200 million in share repurchases.
Daryl Bible: At the end of the year, the negative AOCI impact and the CET-1 ratio from the available for sale portfolio and the pension related components combined would be approximately four basis points.
Now, let's...
Daryl Bible: Turning to slide 24 for Outlook. Let's begin with the economic backdrop.
Daryl Bible: Economy, again, remained resilient to the end of the year, and we estimate GDP growth will come in at 2.8% for 2024 once the fourth quarter data is published.
Daryl Bible: Consumer spending remains solid, though we know challenges for some segments reflected by increasing credit delinquency.
Daryl Bible: We continue to see a soft landing as the most likely outcome for the U.S. economy.
Daryl Bible: We expect Tangible Equivalent Net Interest Income to be $7.1 to $7.2 billion, with the net interest margin increasing through the year and averaging in the mid-$360s.
Daryl Bible: Our interest rate sensitivity remains relatively neutral, aided by the balance sheet actions we took in 2024, including adding forward starting hedges and building our securities portfolio.
Daryl Bible: However, shifts in the shape of the yield curve will drive variability in the NII outlook.
Daryl Bible: We expect full year average loan and lease balances to be $137 to $139 billion.
Daryl Bible: This reflects continued growth in C&I and consumer, with more modest growth in residential mortgages.
Daryl Bible: 4-year average commercial real estate balances are expected to decline in 2024, but we expect the balances to grow modestly.
Daryl Bible: 4-year average deposit balances are expected to be $164 to $166 billion.
and expect to reduce our reliance on non-customer funding sources.
Joining is C. N. Cowden.
Speaker Change: We expect non-interest income to be $2.5 to $2.6 billion. A continued growth in non-interest income is driven by growth in our core businesses, which we expect will drive higher revenues in mortgage banking, merchant, trust, and service charges.
Speaker Change: The interest rate environment remains dynamic, however our diversified product set should help provide relative stability from our fee income businesses.
Continuing with expenses.
Speaker Change: The Outlook includes our first quarter seasonal salary and benefit increase, which is estimated to be $110 million.
Speaker Change: Also included in the Outlook is approximately $43 million for intangible amortization.
Speaker Change: regarding credit, weeks back net charge us for the full year to again be near 40 basis points with continued normalization in the consumer portfolio and improvements to commercial credit costs [inaudible]
Speaker Change: We expect taxable equivalent tax rate to be approximately 24.5 percent.
Speaker Change: As it relates to capital, we expect to reach 11% CET1 ratio in 2025.
Speaker Change: With our 11.67% CET1 ratio at the end of 2024 and the expectation for continued strong capital generation, quarterly share repurchases are expected to be higher than the third and fourth quarter of 2024.
Speaker Change: In 2025 we remain committed to our four priorities including growing our New England and Long Island markets.
Speaker Change: Optimizing resources through simplification, making our systems resilient and scalable, continuing to scale and develop our risk management capabilities.
Speaker Change: Continued progress and completion of these priorities will enable the bank to continue to grow in the future, both organically and inorganically.
to conclude on slide 25.
Speaker Change: The floor is now open for your questions. If you would like to ask a question at this time, please press star then the number 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.
Speaker Change: Our first question will come from Manan Ghassalia with Morgan Stanley. Please go ahead.
Hi, good morning.
Good morning, Manal.
Speaker Change: Daryl, can you unpack your comments on capital and buybacks, you know, I think you've said previously that you can stay above an 11% CET ratio and do about $2 billion in buybacks.
Speaker Change: I don't know if I should be reading too much into the tilde 11% guide on CET-1, does that imply you can do more than $2 billion this year and bring that capital ratio down from 11.7%?
Speaker Change: So Manan, we feel comfortable that we can basically operate our company at 11%, you know, where we are today.
Speaker Change: what the economy looks like and all that. So our plans are to bring our ratios down throughout the year. We'll be opportunistic from that, but it's also going to be driven by our RWA growth, how much our loan growth is.
Speaker Change: But, you know, it's fluid right now whether we're going to have a strong lung growth in 25 or something maybe not as strong. So, we're have a lot of flexibility there to do that. But, you know, if the plan [inaudible]
Great. Very clear. Thank you.
Speaker Change: The question is what is driving that the most right now and what matters most for that to continue to come down in 2025? Is it the short end, the long end? Is it getting updated financials from your borrowers and the upgrades that come from that? What's most important from here?
Speaker Change: So the highest percentage of reduction in our criticized balances was basically full payoffs
Speaker Change: So, we still have a lot of businesses still curing and getting better. We talked about it in prepared remarks. Some of the COVID industries that were impacted now have much stronger P&Ls.
Speaker Change: And finally, we did have some partial pay downs and some charge offse. But the biggest driver was the yield curve. Now, as we look into 2025, right now the yield curve is a lot steeper than it was back at the end of the third quarter
Speaker Change: The pace of the Fed reductions, right now it's one or two reductions in 2025, that really helps our C&I portfolio mainly in the leverage lending area, and if that continues to come down more than that, that would be more positive.
So we still expect to have
Speaker Change: The good news is we got basically out of a lot of credits that were higher risk and our criticized balances that we have left.
Speaker Change: You know, on the books right now are a better quality criticized book. So we feel really good at where we are.
So, it sounds like from a credit perspective...
Speaker Change: From a charge-off perspective, your outlook hasn't really changed, and I know in the past you've said that
Speaker Change: Yeah, so from a charge-off perspective, I know that's not, you know, through the income statement, you know, our retail consumer portfolios are normalizing, so we think that's going to be a little bit higher than what it was in 24, but we believe that our commercial credits, both CNI and CRE, will continue to come down in net charge-offs.
Speaker Change: Now from a provision perspective, you know, I think provision wise, you know, we feel really good at our current allowance levels and when you look at
Speaker Change: You know what we're could see in the future We would expect allowance levels to basically based upon the growth that we have in loans
coupled with the economic conditions that basically impact these industries.
Speaker Change: Right now, the economic conditions from what we're seeing from the models and the projections are pretty tame, but we're having some lung growth, so we're providing to it from that perspective. Depending on lung growth, we'll provide more on day one. If we have less lung growth, we'll have less provision.
Great, thank you.
Speaker Change: Thank you. Our next question will come from Bill Karkatchy with Wolf Research. Please go ahead.
Thanks. Good morning, Daryl.
Bill Karkatchy: I wanted to start off on the progress you've made in reducing your CRE exposure. It's been well reflected in your declining stress capital buffer but
Brian Klock: As you reflect on that improvement, what's been the response from the client side? You're there for them, but have they noticed a difference as you've actively taken that concentration ratio from 136% down to 136 from 183?
Speaker Change: You know, I would say Peter Darcy and his team have done a tremendous job really managing through what we've been going through the last couple of years. We have been...
for the most part.
So our core customer base is still intact.
Speaker Change: Even though we weren't really lending much in CRE over the last couple of years, they now know that the pipeline is open and we're now working with them. If you actually look at the pipeline in CRE, we have about a $1.5 billion in pipeline now there, which is starting to build, which is nice.
Brian Klock: As a follow up on your earlier credit comments, Daryl, could you frame stress in the portfolio if we were to get no more cuts from here versus two to three more? Is it gonna be enough relief for some of your borrowers if we didn't get any more cuts from here? [inaudible]
Brian Klock: Yeah, but I mean, obviously, you know, it's great to stay where they are, you know, there will be some stress in the system.
Brian Klock: We had a nice reduction in our office criticizes this quarter, but that doesn't remove all the risks that you have out there But the fundamentals are still really getting better our construction book You know seems to be on track doing really well our other parts of CRE if you look at it from a hotel retail multifamily basis all seem to be performing well and as expected
Brian Klock: So, I'm not going to say we aren't going to have any more increases to criticize or no more charge-offs.
Brian Klock: You know the level that you'd look to reinvest in the business.
Brian Klock: Well, I'm basically just going to tell you, we're going to basically be at 11% CET1 ratio. It's going to be driven by our RWA growth, and depending on that, we'll determine how many share repurchases we do this year.
Very helpful. Thanks for taking my questions Daryl. Thank you.
Speaker Change: Thank you. Our next question will come from Ibrahim Poonawalla with Bank of America. Please go ahead.
Hey, good morning.
Good morning.
I guess...
Speaker Change: A couple of follow-up questions, when you think about the margin outlook and your margin guidance.
Speaker Change: If we don't see any move from the Fed and if...
Speaker Change: You can remove loan growth like how do you think the trajectory of the name plays itself out from here like should we?
Speaker Change: Think about it as the back book repricing should continue to be a tailwind and deposit costs are stable to lower or Is that not the right framework and how to think about what NIM would do in a static balance sheet?
Yeah, so high level, Ibrahim.
Speaker Change: You know, when you look at our Received Swap Portfolio, we already have locked in and it's going to increase. If you start with the fourth quarter of 2024 and look at the fourth quarter of 2025, we have over a 50 basis point increase in that book, and that's a given.
Speaker Change: If you look at our fixed rate repricing assets on the asset side of the balance sheet, the investment portfolio, consumer loans, and residential mortgage loans,
Speaker Change: you know, from fourth quarter to fourth quarter should be up 20 to 25, 30 basis points depending on the shape of the curve. Consumer loans and residential mortgage loans, you know, up maybe 10 to 20 basis points.
Over that time period so that's all really good
Speaker Change: So these are really driven by Fed actions. We still believe that we will have good repricing going down in our non-maturity deposits Successfully, we think our deposit paid is will reach 50% in 2025
Speaker Change: It's really trying to manage through and do things that make sense for our balance sheet and our customers.
The four priorities you lay out on slide 23.
Speaker Change: As we think about the expense outlook for this year, you have some larger tech projects going on.
Speaker Change: Yes, so when you look at our expenses, you know first I want to just thank all my colleagues in the company you know, we had 2024 and
Speaker Change: We spent a fair amount of money on some significant projects. We're doing the same thing again in 2025.
Speaker Change: Well, and data center, three new data centers. You don't do that very often, probably every 10 to 20 years. We're putting in a new general ledger system, a financial system. That's also probably every 10 or 20 years.
From a commercial perspective, you know, we've...
Speaker Change: how we serve our customers and all that that is critical.
of what we do.
Speaker Change: Treasury Management and other things that support our clients are things we will continue to invest in.
Speaker Change: Over time so what I look at it is we got a big hump We're going through right now with some major projects, and there's other projects We're also doing at the same time that will probably linger on into the expense run rate
Thanks for taking my questions.
Thank you.
Speaker Change: Thank you. Our next question will come from Gerard Cassidy with RBC. Please go ahead.
Hey, Daryl. Hey, Drew. How you doing? Good, thanks.
Gerard Cassidy: I'd like you to see, if you could frame out for us the expansion, you talked about the focus on New England and Long Island.
and through organic growth.
Speaker Change: How long do you think it will take you to get to the levels or the, you know, contribution to the consolidated numbers that these areas, that you've targeted for these areas? And in saying that, how big do you think they could get as a percentage of the total pie? What's the ideal kind of exposure?
Gerard Cassidy: Yeah, Gerard, what I would look at is what we had in Baltimore. We got into the Baltimore market with the All First transaction about 20 years ago.
Gerard Cassidy: And if you look at that and where we are today 20 years later, you know, we're a dominant player in the city of Baltimore.
Gerard Cassidy: You know, whether it takes 20 years or whether it's something shorter, that really depends on if we have inorganic growth in those periods.
Gerard Cassidy: But right now, we're increasing our business bankers, we're increasing commercial lenders, we're increasing wealth managers.
Gerard Cassidy: and people are starting to notice us there. We actually were one of the larger players in SBA in 2024, even with a really small branch distribution. So we're having an impact, but I think our impact will continue to increase and grow.
Speaker Change: had. Any thoughts or comments on the way you guys are looking at all of this?
Gerard Cassidy: Yeah, Gerard, you know, I think we're very optimistic You know, I think we're hopeful that new administration puts people in place that Basically are more balanced really focus on their true risks
Gerard Cassidy: of the industry. If you look at Governor Bowman's speech that she gave last week in California, her priorities that she believes right now is prioritizing safety and soundness risks, which is really critical and important.
Daryl Bible, Brian Klock
Speaker Change: So, you know, I think if you know, we at M&T, you know, we have our fundamentals and how we run the company We're very much aligned with that type of thinking
Speaker Change: You know, and we think, you know, you can run a really good successful bank if you just focus on the fundamentals.
That's what we try to do each and every day.
Speaker Change: We think that's really important. So we're optimistic and feel really good about it and we'll just see what happens when President gets in office Monday and starts making some decisions on regulatory people in these spots
Great. Appreciate the color. Thank you, Daryl.
Thank you. Our next question will come
Morning, Daryl. Morning, John.
Speaker Change: On, just on the credit, if I could just go back to that, I appreciate the color you gave.
Speaker Change: on that front. Just based upon your outlook, if credit trends play out, as you had noted, you expect a bit more stress in office, but some improvement elsewhere. Do you expect that you could see continued reserve releases?
Speaker Change: through 2025? I know you put the reserve declined about a bit this quarter. I'm very modest. But could you expect continued release if credit plays out as you had described?
Speaker Change: We definitely believe from a commercial CRE perspective, as things continue to improve and we have less criticized loans, less non-accrual loans out there, that you're going to see improvement in the allowance.
Speaker Change: and we're really basically building a very diversified balance sheet, diversified revenue stream.
From that perspective, so, you know...
Speaker Change: I'm not going to say we can definitely release a lot of allowance because of that mixed change that's happening.
Speaker Change: But I think within that mix change, you're seeing the commercial side of it definitely improving it better. But on the consumer side, we get paid for these higher yields and higher returns that we're going to receive on that. So it makes sense all in all in the long run.
Speaker Change: Okay, thank you. And then just separately, you know, back to the...
Speaker Change: Capital and M&A topic. I know you did mention that when you're looking at your markets of interest and broader expansion of inorganic wood
Daryl Bible, Brian Klock
Speaker Change: Yeah, you know, I think we're optimistic. We'll see what happens, you know, when people get into the seats. And I think for us, we are really focused on our four priorities. You know, and I firmly believe as we execute on these priorities,
Speaker Change: You know and we get things accomplished, you know, people will want us to actually be more important or grow into other markets I think we'll have a basically people pushing us or pulling us into those markets and there will be demand for an M&T Bank
Speaker Change: You know, the time period and what we do, how we go to market. And then you have the bigger banks. Bigger banks, while they have the scale and the products and services, they tend to be more line of business oriented.
Speaker Change: is really a great fit for the New England markets. We think that's a great bank there and we'll have a lot of success in how that actually plays out. So we're excited to continue to grow and we actually believe the markets will basically push us into those other markets to make us be successful.
Got it. All right. Thanks Daryl.
Speaker Change: Thank you. Our next question will come from Peter Winter with DA Davidson. Please go ahead.
Good morning.
Speaker Change: Yeah, so if you look from a borrower perspective, what we're seeing right now in the marketplace is kind of a mixed bag, to be honest with you.
Speaker Change: If you look at our specialty businesses that we have and look specifically like in corporate institutional, fund banking, dealer financial services, all those seem to be pretty robust and going very strong. If you look at our middle market businesses that we have throughout our footprint,
Speaker Change: You know, when you look from our perspective, we actually think 2025 and 2026 is going to be really good years. The administration seems to be very much pro-business.
Daryl Bible, Brian Klock
Speaker Change: Can you talk about deposit competition and would you say DDA migration has stabilized and actually could start growing in 2025?
Speaker Change: Yeah, so we definitely saw all of our business lines, with the exception of ICS, were pretty flat. So the disintermediation seemed to have basically gone away.
Speaker Change: I think that's run its course. ICS had a really great quarter and should have a great 2025 and actually contributed and we had positive growth in our non-interest bearing deposits. So we feel very positive from that perspective.
Speaker Change: When you look at the growth that we had in deposits for the quarter, in the quarter we were up over $3 billion in deposits.
Speaker Change: That is really good. It was all customer oriented growth. It is very competitive in the marketplace, but I think it comes back to when I got the question earlier. I just M&T's model and how we go to market and how we serve our clients.
Speaker Change: You know, people want to have, you know, relationships all with one place that can basically fully serve their needs. And I think we're basically being very successful at accomplishing that, and we're seeing...
really good traction there, you know, we expect our
Got it. Thanks Daryl.
Speaker Change: Thank you. Our next question will come from Frank Scaraldi with Piper Sandler. Please go ahead.
Hey, good morning, Daryl. Morning, Frank.
Speaker Change: Just trying to work through, you know, some of the numbers you talked about just just on the call here in terms of
margins such as you know the pickup and swaps and
Speaker Change: repricing securities and loan book and deposit betas and just wondering if you know we think about exit rate for 2025
Speaker Change: You know, just curious, you'd be willing to talk about any guardrails there. Seems like you could perhaps get to the...
sort of a 380 number.
Speaker Change: Yeah, I would love to tell you that Frank, but you know it really depends on really the shape of the curve and what's going on in the marketplace.
Speaker Change: Like I said earlier, we're pretty neutral on the short end of the curve.
Speaker Change: If it stays more flattish, it will be less so from that perspective.
Speaker Change: So it's really hard to tell from that, but I'm optimistic as we start 2025.
Speaker Change: I feel that we have a lot of good things in place.
Daryl Bible, Brian Klock
Okay, and then just follow up on stock buybacks.
Speaker Change: Presumably still going through CCAR again. You seem pretty comfortable with that 11% CET1, sort of regardless, but I'm just wondering aside from whether loan growth
Speaker Change: Throughout the year turns out, you know stronger or weaker than anticipated. Is there otherwise any? Backloading, you know anticipated repurchase activity holding some back Late for later in the year, or do you think it should be?
should we, you know, expect pretty consistent throughout 2025?
Speaker Change: So what I would tell you is, you know, we feel comfortable operating a company at 11% of where we are today. That's kind of a short-term capital target.
Speaker Change: What I believe is our long-term capital target is probably going to be around 10% and I think that's probably going to play out over the next year or two from that. You know as far as when we repurchase shares and all that is really going to be dependent on what we think.
Um...
Speaker Change: Timing is and whether we're opportunistic or not and whatever so we are going to basically tell you guys you guys can calculate what?
Ratio is down, closer to 10%.
Okay, great. I appreciate it. Thanks.
Speaker Change: Thank you. Our next question will come from Erica Najarian with UBS. Please go ahead.
Erica Najarian: Hi, good morning. And just a follow-up on that line of questioning, Daryl, I think it's an off-cycle year this year for DFAST, for
Erica Najarian: category for banks. Are you planning to maybe address that stress capital buffer this year by opting to participate?
Erica Najarian: and also maybe I'll ask the second question here like how should we read into you know the Federal Reserve press release that was issued in December 23rd essentially saying that they were going to
Erica Najarian: Look to improve the transparency of the stress test and also sort of the bank lawsuit and how that could sort of impact You know your path from you know, you mentioned like 11% this year to over the long term 10%
Speaker Change: Yeah, so we actually did already opt into the stress test. We notified the Fed and
Speaker Change: You know, it was approved. So we are doing this dress test again. We firmly believe that with the reduction that we've had in CRE and with reduction that we've had in our criticized and not a cruel balance is. [inaudible]
Speaker Change: and the performance we've had in PP&R that we should stress test better than what we had did in 24. Remember in 24 though, we were only one of three banks that dropped.
Speaker Change: Out of 30 banks, you know that we look at from that perspective But you know, we're hopeful that we can continue to drive it down where our stress capital buffer is still too high From how we look at it and we need to bring it down some more. So hopefully we'll make progress on that this year
Speaker Change: You know, as far as what the Fed came out, you know, I think we applaud Governor or Chairman Powell on...
Great, that's helpful. Thanks, Daryl.
Thanks, Erica.
Speaker Change: Thank you. Our next question will come from Christopher Spahr with Wells Fargo. Please go ahead.
Christopher Spahr: Hi, good morning. So, Daryl, you have a lot of comments about the investments you're putting into the company, and yet when I kind of look at the expense guide, it seems to be relatively measured. So, I'm just wondering, what are the sources, the cost savings or the offsets that you're getting within the franchise and how repeatable those may be?
Yeah, Chris, what I would tell you is...
Speaker Change: One of the things when I joined M&T and I knew the company pretty well from outside looking in, but one of the gems that you have here that I think is really, really important is our business leaders that we have and throughout the company that run their groups.
Speaker Change: They are all really entrepreneurial and they don't like to be told what to do, but...
Speaker Change: They are really good at executing what and how they do it. So I give all the credit to my peers and how they look and restructure their groups and how they make them more efficient, more automated.
and how that all works, so.
Speaker Change: I think that's really important and we don't want to lose that. I think that's what makes us really unique and how successful we go to market.
If you look at our performance in 2024,
Speaker Change: I mean, what we were able to accomplish was pretty amazing, and I think 25 will be better than 24 as I look out, so I feel really good.
Speaker Change: Is it just less headcount over time, less manual operations? Just again, what are the underlying drivers for the savings?
Speaker Change: When I was in other places where I worked, Agile was more of a technology thing.
We've trained all of our business leaders.
Speaker Change: Throughout the whole company we call it the way we work and how they basically work with technology and with other drivers of
how a company works.
Speaker Change: and really works together as teams to make us better each and every day. And everybody is empowered.
Speaker Change: to improve how they operate. It could be as simple as moving things from an Excel worksheet onto all tricks and all that. We've had thousands of those things in our financial area of a re-save hundreds of hours doing that.
Speaker Change: Okay, thanks. And then one last follow up. Your office count shrunk a little bit over the last year. Do you expect that to expand going forward?
Speaker Change: From an office account perspective, I think we're kind of real close.
Speaker Change: I mean, it was within 100 FTE, I think, if I remember. Look at the numbers year over year or something like that. So I think when you look at just how much our vacancy rate is, our vacancy rate is much larger.
Speaker Change: And then that, so we could have some volatility in those numbers and, you know, I really look at what expenses that, you know, they're going to hit for the year and not so much the FTE.
All right. Thank you.
Speaker Change: Thank you. Our next question will come from Matt O'Connor with Deutsche Bank. Please go ahead.
Speaker Change: Thanks for squeezing me in. Just a question on fees. I mean, the trends have been good, the outlook is solid.
Speaker Change: But do you feel like you'd need maybe a broader product set? You know both to boost kind of the contribution of fees to overall revenue And then I guess I guess I'm thinking specifically like in capital markets where
Speaker Change: More of your peers have kind of veered into that over the last several years, and you're still relatively small.
Speaker Change: some of the hedging services you provide and things like that.
Speaker Change: Yeah, so we actually are growing out in that area. Peter Darcy and his team have put some investments in talent over the last couple years and we'll probably continue to do that in the next couple years, but we are really focused on growing out.
We also see some nice growth
within our CRE platform.
Speaker Change: One of our people that works for Peter has really done amazing things.
Speaker Change: And we're going to continue to do more of those things throughout that will generate more fee income. You know, we will plan to continue to serve our CRT customers.
Speaker Change: We think that our choices and options that we have now won't be just on balance sheet. We have a lot of off balance sheet and growing off balance sheet alternatives that
and really help drive.
Speaker Change: and serve them as well as to serve our fee income. So I think we're headed in a really good direction. You know, as far as mortgage goes, Matt, we've continued to hire producers, both in commercial and residential.
Speaker Change: You know, they've had tremendous growth the last couple of years.
Speaker Change: Expected to have really good growth. She's we're expanding in Europe now So that that's something we're following our customers our customers have asked us to follow them to Europe and work We're following them and serving their needs there So I think our fee income area is actually very Positive has a lot of good momentum and will continue to grow and be a good
Daryl Bible, Brian Klock
That's helpful, thanks for the detail.
Speaker Change: Thank you. At this time, we have no further questions in queue. I would like to turn the call back to Brian Klock for any additional or closing remarks.
Brian Klock: Again, thank you all for participating today and as always, if clarification of any of the items in the call or news release is necessary, please contact our Investor Relations Department at area code 716-842-5138 and have a great day.
Brian Klock: This does conclude the M&T Bank fourth quarter and full year 2024 earnings conference call. Please disconnect your line at this time and have a wonderful day.
Go to Beadaholique.com for all of your beading supplies needs!