M & T Bank’s commercial loan portfolio, which includes exposure to city hotels and construction projects, continues to weigh on the company’s bottom line.
Chief Financial Officer Darren King said banks in Buffalo, NY were on the “watch list” after some companies struggled to pass inflation costs on to their clients.
“The input cost went up faster than the price,” King said in a phone call with analysts after M & T reported the results for the second quarter. “This reduced debt repayment coverage.”
According to King, M & T is doing a “small remix” in its commercial lending business and is not ready to give a “clear signal.”
“There are more people in the office, but we haven’t returned to pre-pandemic levels,” he said. Healthcare and office space.
At the same time, King assured investors that the $ 204 billion bank showed no signs of stress in consumer accounts.
“We’re still worried and we’re seeing where the next problem lies,” he said. “But so far, nothing flashes red to indicate that a major crisis is coming.”
In an interview, RBC Capital Markets analyst Gerald Cassidy said M & T has a “conservative underwriting culture.”
But he said the bank’s second quarter performance $ 7.6 billion acquisition “It’s hard to see some of the underlying trends,” said People’s United Financial in a deal closed in April.
Since the early days of the pandemic, hotel loans have been of particular concern to M & T. During the fourth quarter of 2020, banks Record a surge in non-performing loans, And about 80% of the increase was related to hotel loans. Many city hotels are affected by fewer business trips during a pandemic.
Cassidy said the bank was “involved in a pandemic” in its exposure to a city hotel that “surprised many investors.” “But over the 30-year cycle, the company outperforms all its peers in terms of credit losses, and we expect it to happen again.”
M & T recorded a net amortization of $ 50 million in the second quarter. This was an increase of 8.7% compared to the same period last year, although the results were distorted by the People’s United merger. The ratio of non-performing loans to the total loan amount decreased from 2.31% in the previous year to 2.05%.
Preventive estimates of bank credit risk as a percentage of outstanding loans fell from 1.62% in the previous year to 1.42%.
Net income for the quarter was $ 218 million, down approximately 52% year-on-year, reflecting lower mortgage bank revenues. Profit per share was $ 1.08, well below analysts’ estimates of $ 2.39 surveyed by FactSet Research Systems.
Non-interest expense increased 62% from the second quarter of last year to $ 1.4 billion, primarily reflecting the impact of the People’s United acquisition.
M & T’s net profit margin increased 24 basis points year-on-year to 3.01%.