M&T Bank 4Q15 Earnings Call Notes

M&T Bank (MTB) Q4 2015 Results – Earnings Call Transcript

René Jones — CFO

Merger with HCBK finally completed

“we completed the merger with Hudson City Bancorp, which was immediately accretive to M&T’s net operating earnings, risk-based capital ratios and tangible book value per share in-sync with our earlier projection.”

Lending conditions competitive, but demand healthy

“While lending conditions on the commercial side remains very competitive with pressures from both bank- and non-bank-lenders, loan demand remains healthy, bolstered by repeat business with existing customers, who value our relationship approach to lending. ”

Pricing is actually still coming down has smaller banks compete

“In terms of the market it’s kind of interesting. So we characterize it to still be intensely competitive, as other banks are really offering better pricing and then sometimes structure than we’re able to. But on the whole, pricing in lowest market like it’s still coming down slightly, it’s not stable but still coming down. Smaller banks are routinely below 200 basis points in terms of margin, maybe 150 to 160 basis points. We’re seeing places where there is no recourse, limited covenants, and in some cases people waiving due diligence.”

CRE trends are a concern, but there is not yet an oversupply

“We had an annual update that we do on our real estate in our board meeting in November, before all that stuff came out. And it’s sort of mirrored everything we said and talked about, sort of mirrored what the Fed is saying. So those trends are definitely out there. I think one of the things that’s clearly happening at this point in time is that there is still not – in the overall market, some markets may be different, but there is not yet an oversupply. And to us it’s a bit of a warning that you got to keep – you got to watch out for your underwriting.”

Loan growth trends have been really solid

“It’s really clear now that the loan growth trends have been really consistent and very solid. So my sense is, we don’t see any signs of them abating. And quite frankly, as I said, our production in the fourth quarter was relatively high, so slightly positive in my mind in terms of confidence.”

The only place where you see higher spreads/delinquencies is in indirect auto

“The only place and it’s not in M&T’s book, on a national level where you see both higher spreads and higher delinquencies, is in the indirect auto space. When we look at our book, maybe because it’s so concentrated in the 700 FICO space plus, we’ve actually seen no deterioration there. So those are some of the things we’ve been looking at lately.”

We think our optimal capital structure is lower than where it is today, but we’ll have to prove it to regulators

“our thought process is that our optimal capital structure is definitely lower than where it is at today. But we’ll have to work our way through the CCAR and go through that process. Having said that, when you look at this, to us it’s one of the more important things, I mean, it’s why we would go to pretty heavy length to continue to invest and make the CCAR process like perfectly linked with the rest of our processes in the bank, because it’s so important to be able to do well and to be able to show your risk profile, so you can return that capital.”