M&T Bank Corp., the first large U.S. bank to report quarterly results, on Thursday said easing mortgage pressure contributed to higher-than-expected profit.
Results marked a recovery from the prior quarter, when the U.S. housing slump forced the mid-Atlantic regional bank to write down some home loans and buy back troubled loans it had sold.
Second-quarter net income for M&T, which counts Warren Buffett's Berkshire Hathaway Inc. among its largest shareholders, rose 1 percent to $214.2 million, or $1.95 per share, from $212.6 million, or $1.87, a year earlier.
Profit topped the average analyst forecast for $1.85 per share, according to Reuters Estimates. It increased from the first quarter's $176 million, when profit had fallen 13 percent from the comparable year-earlier period.
Results were significantly improved, Chief Financial Officer Rene Jones said on a conference call.
Lehman Brothers Inc. analyst Jason Goldberg wrote that earnings were fueled by better-than-expected fee income results, particularly in mortgage banking. Importantly, asset quality metrics only showed modest deterioration.
Mortgage revenue at Buffalo, New York-based M&T fell 14 percent from a year earlier to $35.5 million, but more than doubled from the first quarter. There's a bit of softness, Jones said. Overall, we feel pretty good about it.
In morning trading, M&T shares rose $1.93, or 1.8 percent, to $109.66 on the New York Stock Exchange, after earlier rising to $111.30.
M&T said it has $57.9 billion of assets, and more than 650 branches in seven mid-Atlantic states and Washington, D.C. Most large U.S. banks are scheduled to report results next week.
Revenue at M&T rose 5 percent to $745 million, helped by higher deposit service charges. Noninterest expenses increased 4 percent to $392.7 million.
Loan losses rose, as M&T expected. M&T set aside 76 percent more for bad loans and net charge-offs more than doubled.
Nonperforming loans nearly doubled to $296 million, in part from the addition of a $34 million loan to a mid-Atlantic residential home builder and developer.
The credit is still paying, but the value of the (underlying) property has declined, Jones said. We had to reevaluate the credit on the basis of the loan to value.
Commercial real estate trends, he added, are sluggish.
Berkshire owned a roughly 6.2 percent stake in M&T as of March 31, according to Thomson ShareWatch. Only Allied Irish Banks Plc and M&T Chief Executive Robert Wilmers held larger stakes, Thomson ShareWatch said.
Through Wednesday, M&T shares were down 12 percent in 2007. The Philadelphia KBW Bank Index was down 5 percent.