M&T Bank Corporation Announces Preliminary Stress Capital Buffer

Rhea-AI Summary

M&T Bank (NYSE: MTB) has announced that the Federal Reserve Board has determined its preliminary stress capital buffer (SCB) requirement to be 3.8%, down from the previous 4.0%. The final SCB requirement will be provided by the Federal Reserve Board on or before August 31, 2024, and will take effect on October 1, 2024.

This adjustment lowers the company's regulatory minimum Common Equity Tier 1 (CET1) ratio to 8.3% from 8.5%. M&T Bank expects its second quarter 2024 CET1 ratio to exceed 11.35%.

Chief Financial Officer Daryl Bible emphasized that the stress test results highlight the bank's strong earnings and capital position, which support both organic growth and shareholder returns. Additionally, on May 21, 2024, M&T's board announced a quarterly cash dividend increase to $1.35 per share, payable on June 28, 2024.

Positive

• The preliminary SCB requirement reduction to 3.8% from 4.0%.
• The regulatory minimum CET1 ratio decrease to 8.3% from 8.5%.
• Expected CET1 ratio for Q2 2024 to be over 11.35%.
• Quarterly cash dividend increase to $1.35 per share, up 4% from the previous quarter.

Negative

• None.

Financial Analyst

The reduction in M&T Bank Corporation's preliminary stress capital buffer (SCB) from 4.0% to 3.8% is a noteworthy development. The SCB is a critical measure set by the Federal Reserve to ensure that banks have enough capital to withstand severe economic downturns. A lower SCB indicates that M&T Bank is considered better positioned to manage economic stress, reflecting its robust financial health.

The implied regulatory minimum Common Equity Tier 1 (CET1) ratio has also dropped from 8.5% to 8.3%. This decrease, while seemingly minor, signals a positive development, as it lowers the mandatory capital reserves the bank must hold, potentially freeing up capital for other uses such as growth initiatives or returning capital to shareholders.

It's notable that M&T expects its CET1 ratio to be over 11.35% for Q2 2024, significantly above the regulatory requirement. This strong capital buffer indicates a solid financial position, giving the bank greater flexibility in its operations and strategic decisions.

The increase in the quarterly cash dividend by 4, from $1.30 to $1.35 per share, also underscores the bank's confidence in its financial stability and commitment to returning value to shareholders.

Market Research Analyst

The reduction in the SCB requirement is a positive signal for M&T Bank's shareholders and potential investors. From a market perspective, this reduction implies that the Federal Reserve views the bank as having a lower risk profile, which can enhance investor confidence. Lower regulatory capital requirements mean the bank can potentially allocate more resources towards growth opportunities or share buybacks, which can boost shareholder value.

Furthermore, the dividend increase, while modest, reflects a steady and reliable income stream for investors, making M&T Bank an attractive option for income-focused investors. The timing of this announcement, just before the dividend payout date, aligns with the bank's strategy to reinforce positive sentiment among its shareholders.

One thing to watch will be how the market reacts once the final SCB requirement is released. Should the final SCB differ from the preliminary figure, it could create some volatility. However, given the strong capital position M&T has demonstrated, significant negative impacts are unlikely.

BUFFALO, N.Y., June 28, 2024 /PRNewswire/ -- M&T Bank Corporation ("M&T" or the "Company") (NYSE: MTB) today announced the Federal Reserve Board has determined the Company's preliminary stress capital buffer ("SCB") requirement is 3.8%, down from 4.0% previously. The Federal Reserve Board will provide the Company's final SCB requirement on or before Aug. 31, 2024. Once finalized, the new SCB requirement will be in effect beginning on October 1, 2024.

The Company's regulatory minimum CET1 ratio implied by the preliminary SCB is now 8.3%, down from 8.5%. M&T expects the second quarter 2024 CET1 ratio to be over 11.35%.

"The results of this year's stress test reflect the strength of the company's core earnings power, capital, and ongoing risk management work, including the reduction in the commercial real estate concentration," said Daryl Bible, M&T's Chief Financial Officer. "This strong capital position supports organic growth, as well as growth in new customer relationships and returning capital to shareholders over time."

On May 21, 2024, M&T's board of directors previously announced that it declared a quarterly cash dividend of $1.35 per share on its common stock. This represents an increase of $.05 per share, or 4 percent, from the previous $1.30 per share dividend paid in the first quarter of 2024. The dividend is payable June 28, 2024, to shareholders of record at the close of business on June 3, 2024.

About M&T

M&T Bank Corporation is a financial holding company headquartered in Buffalo, New York. M&T's principal banking subsidiary, M&T Bank, provides banking products and services in 12 states across the eastern U.S. from Maine to Virginia and Washington, D.C. Trust-related services are provided in select markets in the U.S. and abroad by M&T's Wilmington Trust-affiliated companies and by M&T Bank.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, and future performance of M&T, including under hypothetical regulatory stress testing scenarios. Any statement that does not describe historical or current facts is a forward-looking statement, including statements based on current expectations, estimates and projections about M&T's business, and management's beliefs and assumptions. Forward-looking statements are typically identified by words such as "expect," "anticipate," "continue," "will," "would," or "may," or by variations of such words or by similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Many possible events or factors could affect M&T's future financial results and performance and could cause actual results or performance to differ materially from anticipated results or performance. M&T provides further detail regarding factors which could affect forward-looking statements in its Form 10-K for the year ended December 31, 2023, including in the Risk Factors section of such report, as well as in other SEC filings. Forward-looking statements speak only as of the date they are made, and M&T assumes no duty and does not undertake to update forward-looking statements.

Investor Contact:
Brian Klock
(716) 842-5138

Media Contact:
Frank Lentini
(929) 651-0447 / flentini@mtb.com

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SOURCE M&T Bank Corporation

FAQ

What is the new preliminary stress capital buffer (SCB) requirement for M&T Bank (MTB)?

The new preliminary stress capital buffer (SCB) requirement for M&T Bank is 3.8%, down from the previous 4.0%.

When will the Federal Reserve Board provide the final SCB requirement for M&T Bank (MTB)?

The Federal Reserve Board will provide the final SCB requirement for M&T Bank on or before August 31, 2024.

What is the expected CET1 ratio for M&T Bank (MTB) in Q2 2024?

M&T Bank expects its CET1 ratio for Q2 2024 to be over 11.35%.

By how much has M&T Bank (MTB) increased its quarterly cash dividend?

M&T Bank has increased its quarterly cash dividend by 4%, raising it from $1.30 to $1.35 per share.

When will M&T Bank 's (MTB) new SCB requirement take effect?

M&T Bank 's new SCB requirement will take effect on October 1, 2024.