M&T: A regional with CRE problems

Ah, it’s that exciting time again—banks setting aside time to chat with analysts from other banks. So step right up and watch as the aforementioned analysts (AKA: Warriors for WFH) grill Banking's C-suite on the lack of RTO and its effects on their CRE balance sheet.

Into this we have Poor M&T Bank , which seems to be having a bit of a moment. Property values are falling and the only way to get someone to deposit anything is by offering higher interest rates. It’s tough out there!

Banking, as ever, remains a journey of Loan-to-Value (LTV) fluctuations and awkward repricing timing. When you think you’ve got everything under control, along comes S&P with a mood-killing Outlook downgrade. Cue the CFO  assuring everyone that this is totally not the first step toward a financial turmoil ahead. And so it goes at M&T

It seems S&P is concerned about M&T’s criticized commercial real estate portfolio, downgrading its Outlook to Negative a week ago. Apparently, 26.7% of it—or a cool $8.5 billion out of $32.4 billion—is looking a bit shaky. For those not fluent in banker speak, a "criticized loan" is basically the financial equivalent of suspicious neighbors, they don’t have to be an immediate problem, but you should definitely monitor the situation.

In the midst of all this, M&T’s net interest margin is shrinking, dipping to 3.52%. And their return on common equity? Down to 8.49% from 9.77%.

Let’s peek at the bank’s balance sheet,

The bank’s liquidity is ( or as referenced as Securities and Cash)
52%. Interest-bearing deposits at other Banks,
19% Available for Sale Securities (Pre-tax Unrealized Loss of $263 million, eek)
24% Held to Maturity Securities (Pre-tax Unrealized Loss of $1,216 million future ouch)
2% Other Securities
3% cash

And on the Liability Side
77% Deposits
30.3% Non-Interest Bearing
69.7% Interest-Bearing
9.6% Borrowings
23% Short- term
21.8% Accrued Interest and Other
55.2% Long-Term
12.6% Equity


With $167 billion in deposits and billions more in borrowings, M&T’s financial landscape is looking challenging. Will they navigate their way out of these choppy waters? Or will they need a deus ex machina in the form of the Fed lowering rates? The tea leaves don’t really support the later