M&T Bank Corporation (MTB) is scheduled to report its third-quarter 2014 results before the opening bell on Friday, Oct 17.
In the last quarter, this banking giant delivered a 1.58% positive earnings surprise on the back of lower provisions for credit losses. With this, M&T Bank recorded positive earnings surprises in three of the last four quarters with an average beat of 0.44%.
Will M&T Bank be able to keep the earnings streak alive after combating the challenges that the industry witnessed during the quarter? Let's see what factors might have influenced the earnings report this time around.
Factors to Influence Q3 Results
Banks’ efforts to settle lawsuits related to shoddy pre-crisis mortgage practices remained the key trend in the quarter. This was accompanied by dumping unprofitable businesses and concentrating on those with strong potential. While soft trading volumes and high legal costs were on the downside, the quarter was characterized by increased mergers and acquisitions (M&A) and IPOs and aggressive cost control measures.
Yet, the uncertainty over interest rates kept mortgage activity feeble. With depressed demand for fresh mortgages, lenders might see a lower profit margin for the quarter. Further, a dearth of significant loan growth and pressure on net interest margins from the prolonged low rate environment hurt the top line.
What Management Expects?
Management expects continued pressure on pricing and structures in the commercial real estate portfolio.
Further, it continues to expect slight ongoing core compression and net interest margin to be lower by about 2–3 basis points per quarter. More compression is expected to be driven by moving towards reaching full compliance with the liquidity coverage ratio by the end of 2014. However, growth in net interest income is expected.
Management anticipates lower mortgage banking revenues over the second half of 2014, partially offset by continued improvement in fee-based revenue. Further, expenses are expected to be elevated as investment will remain high on regulatory and other operational initiatives over the next couple of quarters.
Activities of M&T Bank during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at $1.98 per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that M&T Bank is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The earnings ESP for M&T Bank is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.98.
Zacks Rank: M&T Bank’s Zacks Rank #3 (Hold), however, increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Here are some other stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
BB&T Corporation (BBT) has an earnings ESP of +1.41% and carries a Zacks Rank #3. It is scheduled to report its third-quarter results on Oct 16.
Capital One Financial Corporation (COF) has an earnings ESP of +2.08% and carries a Zacks Rank #2 (Buy). It is scheduled to report its third-quarter results on Oct 16.
Hudson City Bancorp, Inc. (HCBK) has an earnings ESP of +16.67% and carries a Zacks Rank #3. It is expected to report its third-quarter results on Oct 22.
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