M&t Bank Corporation’s Earnings Call Contradictions: Shifting Cre Recovery Timelines and Capital Ratio Targets Clash With Prior Guidance

Date of Call: Jan 16, 2026

Financials Results

• Revenue: $759M net income, down from $792M in the linked quarter
• EPS: $4.67 per diluted share, down from $4.82 in the prior quarter
• Operating Margin: ROA of 1.41% and ROCE of 10.87%

Guidance:

• Taxable equivalent net interest income expected to be $7.2B to $7.35B with NIM in the low 3.70s.
• Average loans expected to be $140B to $142B.
• Average deposits expected to be $165B to $167B.
• Noninterest income expected to be $2.675B to $2.775B.
• Total noninterest expense (including intangible amortization) expected to be $5.5B to $5.6B.
• Charge-offs for the full year expected to be near 40 basis points.
• CET1 ratio expected to be 10.25% to 10.5% in 2026.

Business Commentary:

Record Financial Performance and Shareholder Returns:

• M&T Bank Corporation reported record net income of $2.85 billion and record EPS of $17 for 2025, with a top-quartile return on tangible assets of over 1.4%.
• The company increased its quarterly dividend by 11%, repurchased 9% of its outstanding shares, and grew tangible book value per share by 7%.
• The strong financial performance was supported by disciplined focus on fundamentals and strategic investments in growth initiatives.

Loan and Deposit Growth Strategy:

• Average loans and leases increased by $1.1 billion to $137.6 billion, driven by growth in commercial, residential mortgage, and consumer loans, despite a nominal decline in CRE balances.
• Noninterest-bearing deposits increased by $0.1 billion to $44.2 billion, and interest-bearing deposits rose by $2.2 billion to $120.9 billion, reflecting growth in commercial and business banking.
• The strategy involved improving asset quality and expanding access to banking in key markets, which resulted in better loan and deposit growth trends.

Fee Income and Expense Management:

• M&T Bank achieved record fee income of $2.7 billion, marking a 13% increase, with a fee mix as a percentage of revenue rising from 26% to over 28%.
• Noninterest expenses increased by $16 million to $1.38 billion, with a focus on controlling costs while making significant enterprise investments.
• Growth in fee income was broad-based across categories, and expense management was maintained through disciplined investment and cost control measures.

Nonaccruals and Credit Quality Improvement:

• M&T Bank reported a 26% decrease in nonaccruals, with the nonaccrual percentage of total loans reaching 90 basis points, the lowest since 2007.
• The improvement in credit quality was due to a reduction in criticized commercial loans by 27% and better macroeconomic factors.
• These developments reflected the company's focus on improving asset quality and managing credit risks effectively.

Outlook and Strategic Priorities:

• The company expects taxable equivalent net interest income to be between $7.2 billion and $7.35 billion with a net interest margin in the low 3.70s, anticipating 50 basis points of rate cuts in 2026.
• M&T Bank emphasized strategic priorities of operational excellence and teaming for growth to enhance customer relationships and business performance.
• The outlook reflects the company's ability to adapt to economic uncertainties and continues to focus on long-term growth and shareholder value.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted record net income and EPS, 11% dividend increase, 9% share repurchase, and improved asset quality. They expressed optimism about growth across all loan portfolios, fee income momentum, and strong capital generation. The tone was confident, citing 'strong performance' and 'great trajectory' for returns, with statements like 'our results underscore our optimistic investment thesis.'

Q&A:

• Question from Gerard Cassidy (RBC Capital Markets): Regarding the capital ratios and potential reduction if regulatory requirements are favorable, is the CET1 ratio currently a binding constraint?
  Response: No, the regulatory capital limits are not a binding constraint; the bank could potentially lower its CET1 ratio below 10%, but other factors like rating agency comfort also influence capital decisions.

• Question from Gerard Cassidy (RBC Capital Markets): Which regions or property types are anticipated to drive the commercial real estate loan inflection in Q2 2026?
  Response: Growth is expected across all CRE portfolios (regional, M&T RCC, institutional), with strong production in Q4 2025 (over $900M in CRE loans closed in December) providing confidence.

• Question from Robert Siefers (Piper Sandler): What are the best demand areas and willingness to lend in non-CRE categories for 2026?
  Response: Growth will continue in specialty businesses (fund banking, mortgage warehouse) and be bolstered by a new 'teaming for growth' strategy focused on regional expansion and customer relationships.

• Question from Robert Siefers (Piper Sandler): What are updated thoughts on M&A aspirations for the year?
  Response: M&A will occur when it makes sense (scale and density in existing markets), but currently, the focus is on deploying capital to customers, maintaining strong dividends, and share repurchases.

• Question from Matthew O'Connor (Deutsche Bank): Can you elaborate on the deposit environment, net checking account growth, and competitive landscape?
  Response: Deposits are a key focus; the bank is growing customer deposits while managing costs, competing effectively, and prioritizing operating account growth in all business lines.

• Question from Matthew O'Connor (Deutsche Bank): What drove the increase in trading revenues (customer swap book) and is it sustainable?
  Response: The increase is part of a broader trend; capital markets and investment banking revenue is expected to remain strong, with resources added and another record year anticipated in 2026.

• Question from Manan Gosalia (Morgan Stanley): Are the slower fee and expense growth guides primarily due to the MSR accounting change, and what are the core growth rates?
  Response: The accounting change (netting $75M) impacts both lines; core fee growth is expected to be about 4% with broad-based momentum, and positive operating leverage of around 150 basis points is anticipated.

• Question from Manan Gosalia (Morgan Stanley): What is the trajectory for ROTCE over the next 12-18 months and a medium-term target?
  Response: ROTCE is expected to remain around 16% in 2026, with a goal to reach 17% by 2027.

• Question from John Pancari (Evercore): Can you elaborate on underlying commercial C&I growth drivers, such as CapEx or line utilization?
  Response: C&I growth is expected to be 3-5% overall, with increased utilization in the middle market and good momentum across portfolios, supported by the new strategic priorities.

• Question from John Pancari (Evercore): What drove the 30% increase in 90-day past dues and could it impact future credit?
  Response: The increase was due to Ginnie Mae repurchases (attractive fee income) on the consumer side and administrative payment delays on the commercial side; it does not signal a credit quality issue.

• Question from David Chiaverini (Jefferies): What is the deposit beta assumption for the next 50 basis points of rate cuts?
  Response: The deposit beta is expected to remain in the low 50s for the next 50 basis points of cuts.

• Question from David Chiaverini (Jefferies): As loan growth inflects higher, do you expect increased deposit cost competitiveness?
  Response: The bank maintains an 'always-on' strategy for competitive rates while focusing on growing operating accounts; deposit growth is expected to stay in sync with loan growth.

• Question from L. Erika Penala (UBS): Which is more important for management: optimizing ROTCE or optimizing growth?
  Response: Both are important; the focus is on using capital for good returns on loans and customer growth while also distributing capital to shareholders (e.g., 9% share repurchase in 2025).

• Question from L. Erika Penala (UBS): How important is the shape of the curve versus growth trends for the NII guide, and what is the earning asset growth?
  Response: The shape of the curve impacts NII (flattening reduces it), but the bank is neutral on the short end. Growth (3% point-to-point earning asset growth) is a key positive component.

• Question from Christopher McGratty (KBW): Can you provide more meat on checking account traction and outlook for noninterest-bearing deposits?
  Response: Checking account growth is a priority across all business lines (especially business banking); specific account numbers will be shared in the next investor deck.

• Question from Christopher McGratty (KBW): Within the P&L ranges, where are you most optimistic?
  Response: Most optimistic on fee income momentum, NII performance, and disciplined expense management, with confidence in achieving the planned operating leverage.

• Question from Kenneth Usdin (Bernstein Autonomous): How much more room is there to remix wholesale borrowings, and have we seen the bottom in DDA balances?
  Response: Potential to shrink wholesale borrowings by a couple of billion more to optimize the balance sheet. DDA balances are expected to bottom around 3% (with ~50 bps more cuts) and then start to grow.

• Question from Kenneth Usdin (Bernstein Autonomous): As CRE grows again, what is the comfort level for CRE as a percentage of equity?
  Response: CRE is currently at 124% of equity, with a limit of 160%; significant room for growth exists while serving clients and earning attractive returns.

• Question from Steven Chubak (Wolfe Research): How are you thinking about consumer versus wholesale deposit growth in 2026, and is retail deposit growth nearing an inflection?
  Response: The bank is focused on growing consumer deposits; retail deposit growth is improving and expected to continue, supported by treasury management services and regional density.

• Question from Steven Chubak (Wolfe Research): What is the expectation for mortgage banking revenue growth in 2026, particularly in subservicing?
  Response: Mortgage banking revenue should finish the year strong despite some quarterly volatility; subservicing is a niche strength (especially in FHA), with potential portfolio gains in the second half.

• Question from Ebrahim Poonawala (BofA Securities): Is incremental balance sheet growth from core deposits dilutive to the NIM, and what upside exists?
  Response: Dilution is possible, but the bank manages the entire customer relationship (loans and deposits) for attractive returns on capital. The NIM guide is for the low 3.70s, but the bank can be competitive if needed.

Contradiction Point 1

Loan Growth Outlook and CRE Inflection Timing

Contradiction on when CRE loan balances will bottom and begin growing.

Which regions or property types will drive the anticipated inflection in CRE loan growth during Q2 2026? - Gerard Cassidy (RBC Capital Markets)

2025Q4: All four main loan portfolios... are expected to show point-to-point growth in 2026. - Daryl Bible(CFO)

What is the current status of the CRE book inflection in terms of timing and magnitude? - Robert Siefers (Piper Sandler & Co.)

2025Q3: CRE balances to bottom in Q1 2026 (or possibly sooner)... - Daryl Bible(CFO)

Contradiction Point 2

Capital Ratio Guidance and Flexibility

Contradiction on the binding nature and future adjustment potential of the CET1 capital ratio.

If Basel III endgame and stress tests reduce required regulatory capital, would you consider lowering your CET1 ratio (currently 10.25%-10.5%) further? - Gerard Cassidy (RBC Capital Markets)

2025Q4: The current CET1 ratio is not a binding constraint. M&T could potentially go below 10%... - Daryl Bible(CFO)

What is your current view on the CET1 target (10.75%-11%) and potential factors that could lower it? - John Pancari (Evercore ISI Institutional Equities)

2025Q3: The target is under review by the Board. As performance continues, opportunities to decrease the ratio over time will be evaluated. - Daryl Bible(CFO)

Contradiction Point 3

Deposit Growth Strategy and Cost Management

Contradiction on the bank's primary focus for deposit growth and cost competitiveness.

How are the deposit environment, net checking account growth, competitive landscape, and brand strategy driving organic deposit growth? - Matthew O'Connor (Deutsche Bank AG)

2025Q4: The strategy is to grow operating (checking) accounts across all business lines... The bank focuses on offering competitive rates but not being the highest or lowest. - Daryl Bible(CFO)

Are you noticing changes in deposit flow activity, mix shifts, and the ability to reduce higher-cost liabilities given the changed environment, smaller balance sheet, and improved NIM? - Ken Houston (Autonomous Research)

2025Q1: Deposit guidance was lowered, but the bank feels comfortable being at the higher end of the deposit range. - Daryl Bible(CFO)

Contradiction Point 4

Commercial Real Estate (CRE) Loan Outlook

Contradiction on CRE loan growth trajectory and stabilization timing.

Which regions or property types are expected to drive CRE loan growth in Q2 2026? - Gerard Cassidy (RBC Capital Markets)

2025Q4: Strong CRE production is expected across all three sectors... All four main loan portfolios... are expected to show point-to-point growth in 2026. - Daryl Bible(CFO)

What challenges are facing the commercial real estate (CRE) portfolio, and is the decline due to strategic decisions or customer payoffs? - Gerard Cassidy (RBC)

2025Q1: The CRE average balance is expected to bottom around Q4 2025. The pipeline is building, but... CRE to stabilize and start growing by the fourth quarter. - Daryl Bible(CFO)

Contradiction Point 5

Capital Ratio Targets and Strategy

Contradiction on the desired level of CET1 capital, shifting from a specific higher target range to a more flexible, lower range.

If Basel III endgame and stress tests reduce required regulatory capital, would you consider reducing your CET1 ratio (currently 10.25%-10.5%) further? - Gerard Cassidy (RBC Capital Markets)

2025Q4: The current CET1 ratio is not a binding constraint. M&T could potentially go below 10%. - Daryl Bible(CFO)

Given the strong stress test results, what capital level is optimal for M&T, and how do you balance excess capital against potential uses? - Kenneth Usdin (Autonomous Research)

2025Q2: The long-term target is 10% CET1, but given current market uncertainty... the Board has approved operating in the 10.75% to 11% range for the remainder of the year. - Daryl Bible(CFO)