M&T Bank emerged from the Federal Reserve's recent stress tests with a smaller incremental capital requirement, but it's not planning to resume share buybacks.
The caution comes amid uncertainty about the commercial real estate sector, where M&T has significant exposure, and an expectation that capital rules will get stricter for midsize banks.
M&T said Wednesday that its so-called stress capital buffer is set to fall to 4.0%, down from 4.7% in 2022. After accounting for a separate
During the second quarter, the Buffalo, New York-based bank held more capital than its regulators are requiring. Its common equity tier 1 capital ratio sat at 10.58%.
Though that number was down 36 basis points from the same period last year, M&T executives still faced questions from analysts Wednesday about how high the bank plans to allow its capital level to go.
Chief Financial Officer Daryl Bible responded that it's "prudent" for M&T to maintain "extra capital" — in light of uncertainty related to a potential recession and new capital rules.
He added that M&T is not planning to buy back shares anytime soon. Some banks have suggested they may resume buybacks later this year.
"In turbulent times, we're keeping extra capital," Bible said during the company's quarterly earnings call. "We believe now is not the time to be repurchasing shares."
Shoring up banks'
That proposal is seen as likely to affect banks with between $100 billion and $250 billion of assets, rather than just larger institutions. M&T had $207.7 billion of assets as of June 30.
Another potential source of trouble for M&T is its exposure to the commercial real estate sector, which has been hit by changing work patterns at white-collar firms.
During the second quarter, M&T boosted its provision for loan losses to $150 million from $120 million in the first quarter, partly because of a decline in forecasted commercial real estate values. The bank's provision was still considerably smaller than its $302 million reserve in the second quarter of 2022.
Bible told analysts that M&T is reviewing its commercial real estate portfolio quarterly. "Valuations are coming in," he said. "We're doing the best we can with the information we have."
During the second quarter, M&T reported net income of $867 million, which was up 24% from the first quarter. Year-over-year comparisons were skewed by the impact of the People's United Financial merger in the second quarter of 2022.
The bank reported $131 billion in net loans and leases, up less than 1% from the first quarter. Total deposits of $162.1 billion were up by about 2% from the prior three months.
M&T reported $127 million in net loan charge-offs, up from $50 million during the same period last year and $70 million at the end of the first quarter.
