M&T Bank Expects Higher Q2 NII and NIM on Modest Loan Growth

M&T Bank (MTB) projects sequential gains in Q2 2025 net interest income (NII) and net interest margin (NIM), driven by modest loan growth in consumer portfolios and increased average deposits; NII is expected to be in the $7.05-$7.15 billion range and NIM in the mid-to-high 3.60% range for the full year. The bank also anticipates continued strength in fee income across trust, mortgage, and service segments, with full-year projections between $2.5-$2.6 billion. MTB reaffirmed its full-year guidance, expecting loan balances between $135 billion and $137 billion and average deposits between $162 billion and $164 billion.

Analysis

M&T Bank Corporation (MTB) has issued a positive business update for the second quarter of 2025, anticipating sequential improvement in net interest income (NII) and net interest margin (NIM). This optimism builds on Q1 2025 NII of $1.70 billion (a 1.7% decrease sequentially but a 1.2% increase year-over-year) and a NIM expansion to 3.66% from 3.52% in Q1 2024. The expected Q2 uplift is attributed to modest growth in average loans, driven by consumer portfolios offsetting declines in commercial real estate (CRE), alongside a projected rise in average deposits from stronger customer flows and an additional business day; Q1 average loans and deposits were $134.84 billion and $161.22 billion, respectively. Concurrently, MTB foresees continued sequential growth in fee income, which in Q1 2025 rose 6% year-over-year to $611 million, contributing 26% to total revenues, with broad-based strength expected across trust, service charges, and mortgage banking, including the full-quarter impact of new residential mortgage sub-servicing activity. While net charge-offs are expected to be volatile quarterly, they are projected to align with the full-year estimate of approximately 40 basis points. MTB also reiterated its full-year 2025 guidance: loan balances between $135 billion and $137 billion, average deposits of $162 billion to $164 billion, NII in the $7.05-$7.15 billion range, NIM in the mid-to-high 3.60% range, and fee income between $2.5 billion and $2.6 billion, trending towards the higher end. Full-year GAAP expenses are reaffirmed at $5.4 billion to $5.5 billion. This outlook contrasts with JPMorgan's anticipated decline in investment banking fees and Comerica's more cautious deposit forecast, though M&T Bank's shares have outperformed the industry over the past year with a 27% gain.

Key Decisions for Investors

• Investors should note M&T Bank's positive Q2 2025 outlook for NII and NIM, supported by loan growth and rising deposits, alongside strong fee income projections, which collectively reinforce the bank's reaffirmed full-year guidance.
• Monitor the execution of MTB's strategy, particularly the growth in consumer loans versus the decline in CRE, the sustainability of customer deposit inflows, and the management of net charge-offs towards the guided 40 basis points for the full year.
• Consider MTB's consistent performance and diversified revenue streams, especially in light of its 27% share price increase over the past year, while also being mindful of the mixed outlooks from peers like JPM and CMA, which may signal broader sector-specific headwinds or opportunities.