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Buffalo-based M&T Bank said commercial real estate remains troubled and the lender continues to dial down exposure while hanging onto its cash.
“Definitely not out of the woods with CRE,” Chief Financial Officer Daryl Bible said on an earnings call Monday, “but we’re having some positive trends.”
Office loans showing signs of stress rose slightly, to $1.2 billion last quarter from $1.1 billion at the end of 2023. But stressed CRE loans fell to 26.4% of the portfolio from 26.7%, suggesting problems aren’t worsening. It stock price rose 7% in midday trading
“CRE is very manageable,” Bible said. “We’ll continue to address it.”
M&T added the relative calm might not last. The bank has decided to park its spare cash in its vaults and didn’t spend any of its capital buying back shares from investors last quarter. Nor is it inclined to do so until it has a better sense of where CRE is headed, among other factors.
The bank became a major hotel and CRE lender in New York City starting about a decade ago. Its CRE portfolio has shrunk by 7% in the past year, to about $33 billion, and management said the decline will continue. S&P Global advised in March it may cut the bank’s credit rating due to its CRE exposure, though Bible said he didn’t think M&T would be downgraded.
First quarter net income fell by 21%, to $553 million, on a 6% drop in revenue, to $2.3 billion.
Given that CRE isn’t worsening and depositors are staying loyal, one analyst asked why Bible wasn’t sounding more optimistic about the future.
“I’d much rather under-promise and over-deliver right now,” Bible said.
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Aaron Elstein , 2024-04-15 19:18:06
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