M&T Misses Consensus; Weak Lateral for DePfa, Aareal

M&T Bank reported 1Q24 results earlier which missed expectations on what appears an overrun of credit losses. MTB is seen as a peer of NYCB and, thereby, as comparable to the European issuers linked to the US CRE issues; PBB (DePfa) and Aareal.

• Credit losses came in over 20% ahead of consensus though down a little from 4Q23’s run-rate, apparently reflecting “elevated levels of criticized commercial and industrial loans and loan growth”. Commentary indicates a range of reasons but the first one named is commercial real estate.
• Non-accrual loans are up 9bp from Dec-23 (to 1.71%) but below the year-ago point, indicating a reversal of an improving trend seen through 2023. “Criticized” CRE loans are also 30bp (from Dec-23) higher at 14.3%. This figure had been deteriorating fast through 2023 but at least the rate of worsening has reduced a little here.
• Outlook: there’s little outlook for CRE quality specifically but net charge offs are seen at 40bp for FY24, which compares with 42bp just reported so management do see some improvement across the year.