(Reuters) – M&T Bank raised its forecast for annual net interest income on Thursday, on expectations that the Federal Reserve’s policy easing would help lower deposit costs and boost loan demand.
Cooling off of inflation and a labor market in better balance have boosted hopes for an interest rate cut by the U.S. central bank in September, which would likely ease the pressure on banks to pay a higher rate on deposits.
M&T expects annual NII — the difference between what a bank earns on loans and pays on deposits — to be between $6.85 billion and $6.90 billion, compared with its previous forecast of plus or minus $6.85 billion and LSEG estimates of $6.85 billion.
The lender said its revised outlook reflects two rate cuts this year versus one considered in its previous forecast.
M&T would also resume share repurchases that were put on hold and said would carry out buybacks of $200 million each in the third and fourth quarters.
Meanwhile, higher deposit costs led to a 4.5% fall in the Buffalo, New York-based lender’s NII to $1.72 billion in the second quarter.
M&T has a big exposure to the beleaguered commercial real estate sector compared to its regional banking peers. But it has been working on to shrink that portfolio.
“We continued to grow our commercial and industrial and consumer loan portfolios, while lessening our commercial real estate exposure,” CFO Daryl Bible said.
Provision for credit losses came in flat at $150 million in the quarter ended June 30, reflecting lower levels of criticized CRE loans, M&T said.
Criticized loans are those that are deemed to have an elevated level of credit risk.
Net income available to common shareholders fell to $626 million, or $3.73 per share, in the quarter, from $841 million, or $5.05 per share, a year earlier.
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Shilpi Majumdar)
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