Why M&T Bank stocks are falling today

The bank’s third-quarter results failed on both the top and bottom lines.

What happened

M&T Bank stock (MTB -13.80%) was trading about 12.9% lower at 12:56 ET on Wednesday after the bank posted disappointing third-quarter results.

So what

M&T Bank reported diluted earnings per share of $3.53 on total revenue of approximately $2.25 billion – both numbers that fell short of analyst consensus estimates. It completed its major acquisition of People’s United Bank earlier this year and is still in the process of integrating it into its operations.

Net interest income – the profit banks make on loans and bonds after covering the costs of funding those assets – jumped about 19% compared with the second quarter, but also fell short of analysts’ estimates. Total loan balances also declined sequentially, even as many large banks reported loan growth.

The institution’s credit quality, however, still looks pretty clean. Loan losses increased only slightly in the quarter, and total non-performing assets (such as 30-day or 90-day-delinquent loans) actually decreased from the second quarter. The bank made a provision for credit losses of $115 million in the quarter, which included a reserve of $52 million.

Now what

I’m not exactly sure what’s causing such a sharp drop in equities on Wednesday, as the earnings report doesn’t look too bad apart from the big gaps in the estimates.

It’s not great that its loan growth has slowed or that its net interest income has come in below expectations, but M&T Bank has just completed a major acquisition. As such, analysts can take a while to determine how to accurately model their results again. Given that their credit quality remains quite healthy, and based on what is now known, I’m not too concerned about this bank’s third quarter results.

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