M&T Bank Facing Accelerating Headwinds

Relative to where things were at the time of the first-quarter earnings, expectations for the rate cycle and bank sector spread margins have changed pretty significantly, and to the detriment of most banks. M&T Bank (MTB) hasn’t performed very well since my last update on the company, as although this remains a very well-run “overgrown community bank” with a very good core franchise in the Northeast, it is also significantly exposed to these worsening spread headwinds.

M&T’s net interest margin could fall about 20 bps from here, and that is going to make it very hard to generate pre-provision profit growth, even though management has been adding hedges to limit the risk. I think M&T’s quality reputation has preserved the share price to some extent already, and I don’t see a lot of near-term upside in the shares at this point.

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M&T Bank Facing Accelerating Headwinds