Banker & Tradesman file photo
M&T Bank reported lower quarterly net income as it was affected by the high costs of retaining high interest-bearing deposits, despite both its loans and deposits increasing in the quarter.
M&T recorded $482 million in profits in the fourth quarter, lower than the $690 million in the third quarter and $765 million in the fourth quarter of 2022 according to a regulatory filing. This was due to lower quarter-on-quarter net interest income and margin on higher costs paid on deposits as customers shift funds to interest-bearing accounts.
Quarterly net interest income declined to $1.722 billion in the fourth quarter from $1.775 billion, resulting in a net interest margin of 3.61 percent, down from 3.79 percent.
“With commercial real estate values and higher interest rates impacting our commercial clientele, our relationship-based approach gives us confidence in our ability to work through those challenges with our customers and appropriately assess the associated credit risk and loss reserves. Over the past year, we have strengthened relationships with our customers and welcomed new ones. We thank our employees for consistently showing up within the communities we serve to make a difference,” M&T Bank Chief Financial Officer Daryl Bible said in a statement.
Total loans slightly increased to $132.8 billion from $132.6 billion as commercial and industrial loans drove growth but were offset by a decline in commercial real estate loans. Deposits increased 1 percent to $164.7 billion from $162.7 billion from a quarter ago due to demand for interest-bearing deposit accounts.
M&T also had higher provision for credit losses in the quarter as pressure on investor-owned commercial office properties continued and loan balances increased by $1.7 billion from a quarter ago. It also had higher borrowings to provide for interest-bearing deposits, up to $13.05 billion from $12.58 billion last quarter.
Despite the quarterly declines, the bank’s full-year 2023 included net income at $2.74 billion, higher than the $1.99 billion M&T reported in 2022. Net interest income jumped to $7.12 billion in 2023 from $5.82 billion in 2022, leading to increased margins of 3.83 percent from 3.39 percent.
“M&T enters 2024 with stronger levels of capital, liquidity, and credit reserves than a year earlier. Average commercial and consumer loans as well as average deposits all increased in the final quarter of 2023, and expenses remained well controlled after considering the FDIC special assessment,” Bible said.
The bank’s capitalization or common equity tier 1 capital ratio increased 3 basis points to 10.98 percent at the end of 2023, compared with 10.95 percent as of the end of the third quarter
