After slow quarter, M&T says People's United deal will fuel loan growth

M&T Bank said its $7.6 billion acquisition of People’s United Financial should help drive solid loan growth through 2022, despite stiff competition and elevated payoffs in its commercial real estate portfolio.

Rising interest rates should also drive improved lending profitability for the newly combined bank, Chief Financial Officer Darren King said Wednesday after M&T posted its first-quarter results.

Total loans at M&T are expected to grow between 3% and 5% from the beginning of the second quarter through the end of the year, King said. Excluding Paycheck Protection Program credits, commercial-and-industrial loans are projected to rise 4% to 6% in the same span.

Bloomberg

King estimated full-year consumer loan growth of 7% to 9% through the end of 2022. “We are pleased with the momentum” in consumer loan demand and expect growth “to be strong over the remainder of the year,” he said.

Before the People’s United deal closed in early April, M&T got the year off to a slow start.

Its total first-quarter loans and leases finished the first quarter at $92.2 billion, down 1% from a year earlier. Commercial real estate loans fell 5%, as some clients refinanced with other lenders to capitalize on low interest rates early in the quarter.

Rising interest rates should begin to tame the downward pressure on commercial real estate loans, King said, adding that he expects such loans to be flat through the end of the year. The Federal Reserve raised its benchmark interest rate in mid-March and forecasted several more hikes this year to combat inflation.

Higher rates should bolster M&T’s interest income this year, King said, describing early momentum in the second quarter. “We're beginning to see the tailwinds from rising interest rates,” he said.

M&T’s net interest income totaled $907 million during the first quarter, down 3% from a year earlier.

Its first-quarter net interest margin was 2.65%, down 32 basis points from a year earlier but up 7 basis points from the start of the year.

The company, which now has around $210 billion of assets, reported first-quarter net income of $362 million, or $2.63 per share, compared with $447 million, or $3.33, a year earlier.

With the People's United acquisition, M&T obtained $63 billion of new assets, including loans totaling $36 billion. The company now has more than 1,100 branches, and its reach now extends across New England, including a much bigger presence in Greater Boston. People's United was based in Bridgeport, Connecticut.

The deal was originally expected to close during the fourth quarter of 2021, but the two banks delayed the closing deadline as they awaited the Fed’s approval.