M&T expects loan losses to trend upward, due to weak CRE office

M&T Bank Corp. is closely monitoring its portfolio of office-backed loans amid clouds for the asset class, and expects a modest decline in its losses in 2023.

The agency is “one of the areas where we see a lot of risk and where we focus a lot of our attention from a credit perspective,” CFO Darren King said during the meeting. of January 19 in 2022 four-quarter end. “When we talk about pay-offs that have been raised from the levels we saw in 2022, some of those files are where we saw them.”

M&T’s debt-to-equity ratio was 13 basis points in 2022 and 20 basis points in 2021. As of 2023, King said, “We expect more money loss than strong results in 2022, but remain below M&T’s legacy long-term average of 33 basis points.”

Commercial real estate loans to hotels have been the main focus of concern, King said, but concern peaked two or three quarters ago when about 86% of the hotel’s M&T, meaning loans that were flagged for weakness according to internal ratings. This figure is now below 50%.

In addition to the office, subsidized loans and senior housing have moved up the list of concerns, King said, reflecting the difficulty businesses are having securing workers for the highest levels of employment. the settlement.

At the office, about 20% of M&T’s portfolio was criticized by the end of 2022, King said. “Most of our real estate is fully leased in 2024 and beyond. So far, what we’ve seen is good renewal,” King added. But the bank is emphasizing the installation for negative space and rent.

King said that M&T has an office showing about $ 5 billion, and about 15% in New York. The bank had total assets of $200.73 billion at the end of 2022 and $45.36 billion in CRE loans.

Overall, the debt “remained stable” in the fourth quarter of 2022, King said. The bank’s quarterly net loss fell from $115 million in the third quarter of 2022 to $90 million due to lower payments and an additional $50 million to its allowance.

The bank has been reducing its exposure to CRE, particularly construction loans, in response to negative regulatory audits that have raised his needs.

M&T’s interest income rose 8.9% sequentially to $1.83 billion in the fourth quarter of 2022, and its interest rate expanded 38 basis points to 4.06%. According to King, the bank continues to hope that the value of deposits will be adjusted to the increase in assets.

But he said the bank expects its NIM to remain above 4% for all of 2023 and begin to return to a long-term historical low in 2024 or 2025.

Shares of M&T rose about 5.5% at 2:12 pm ET on January 19, while the KBW Nasdaq Bank Index fell 0.6%.

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