MTB Q1 Deep Dive: Margin Expansion and Loan Mix Offset Deposit and CRE Headwinds

Regional banking company M&T Bank (NYSE:MTB) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 4.1% year on year to $2.40 billion. Its GAAP profit of $4.24 per share was 6.3% above analysts’ consensus estimates.

Is now the time to buy MTB? Find out in our full research report (it’s free).

StockStory’s Take

M&T Bank’s first quarter results did not meet Wall Street’s expectations, with management attributing the outcome primarily to a combination of lower commercial real estate (CRE) loan balances, seasonally lower deposit levels, and a modest decline in net interest income. CFO Daryl Bible highlighted that net interest margin improved 8 basis points, even as average loans declined. He pointed to disciplined deposit pricing, a reduction in higher-cost funding, and strong performance in fee-generating businesses such as mortgage banking and trust services. Additionally, asset quality improved, with lower net charge-offs and a reduction in criticized CRE balances. Management acknowledged a dynamic environment, noting that customer uncertainty around tariffs and broader economic trends led to business investment delays and a pause in some acquisition activity.

Looking ahead, M&T Bank’s guidance is shaped by a cautious stance on CRE loan origination and a focus on maintaining strong liquidity and capital levels. Management expects loan growth to remain muted, particularly in CRE, while C&I (commercial and industrial) and consumer lending are projected to offset some of these headwinds. CFO Daryl Bible stated, "We remain focused on growing customer deposits at a reasonable cost, while also considering loan growth." The company is also monitoring the impact of macroeconomic uncertainties—especially tariffs and regulatory changes—on customer activity and credit quality. Management emphasized flexibility in expense management and signaled ongoing investments in technology and risk management capabilities to support long-term profitability.

Key Insights from Management’s Remarks

Management credited the quarter’s margin expansion to deposit cost discipline and a shift in loan mix, while acknowledging ongoing competitive pressures in CRE and muted deposit growth.

• Deposit cost management: The bank achieved a decline in interest-bearing deposit costs as it reduced reliance on brokered and wholesale funding, helping offset the impact of lower average deposits and providing a lift to net interest margin.
• CRE portfolio runoff: CRE balances declined significantly due to elevated payoffs and competition from other lenders, with management reiterating a disciplined approach to new originations and a focus on reducing riskier office exposures.
• C&I and consumer loan growth: Growth in commercial and industrial (C&I) and consumer portfolios partially offset the CRE decline, supported by momentum in fund banking, corporate institutional lending, and indirect auto finance.
• Fee income momentum: Non-interest income, including mortgage banking and trust services, remained resilient, and management expects further growth as new subservicing relationships ramp up and service charges perform well.
• Expense control and capital return: Management continued to tightly manage expenses, highlighted flexibility to adjust spending if needed, and executed substantial share repurchases, while maintaining a CET1 ratio above 11%.

Drivers of Future Performance

M&T Bank’s outlook hinges on balancing muted CRE loan demand, deposit growth, and adaptable expense management amid an uncertain macroeconomic backdrop.

• CRE loan headwinds: Management expects commercial real estate balances to bottom out by year-end, with muted originations due to competitive pricing and customer hesitancy. The focus remains on selective growth in multifamily and industrial segments to reduce exposure to riskier office loans.
• Deposit growth and pricing: The company anticipates deposit balances to recover from seasonal lows, with an emphasis on attracting stable, low-cost deposits. CFO Daryl Bible noted that higher deposit levels would be deployed to pay down more expensive liabilities or increase liquidity, depending on loan demand.
• Expense flexibility and risk management: Management emphasized the ability to adjust expenses if revenue growth slows, with ongoing investments in systems, automation, and risk controls. The bank is closely monitoring portfolios such as retail trade, manufacturing, and non-profits for signs of stress, and remains prepared to adapt if the macroeconomic environment deteriorates.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will focus on (1) stabilization and eventual growth of CRE and C&I loan balances, (2) trends in deposit growth and the cost of funds, and (3) the trajectory of fee income as mortgage subservicing and trust businesses scale. Monitoring regulatory developments and any shifts in credit quality within key loan portfolios will also be crucial for assessing M&T Bank’s performance.

M&T Bank currently trades at $191.43, down from $197.03 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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