Morningstar DBRS Confirms M&T Bank Corporation's Long-Term Issuer Rating at "A"; Trend Remains Stable

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of M&T Bank Corporation (M&T or the Company), including the Company's Long-Term Issuer Rating at "A." At the same time, Morningstar DBRS confirmed the credit ratings of its primary banking subsidiary, Manufacturers & Traders Trust Company (the Bank), including its Long-Term Issuer Rating at A (high). The trends for all credit ratings remain Stable. The Intrinsic Assessment (IA) for the Bank is A (high), while its Support Assessment remains SA1. The Company's Support Assessment is SA3 and its Long-Term Issuer Rating is positioned one notch below the Bank's IA.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings and Stable trends recognize M&T's strong banking franchise and long track record of top financial performance among its peers with lower earnings volatility. Additionally, the credit ratings consider the Company's consistent and disciplined loan underwriting and workout, which has underpinned its history of low levels of net charge-offs (NCOs). M&T's improved capital levels are also factored into the Company's credit ratings.

The credit ratings also reflect M&T's asset quality metrics, which have led to the current above-trend level of nonperforming loans (NPLs) and criticized loans. While the Company's loan portfolio, including its above-peer commercial real estate (CRE) concentration, has historically been very well-managed, secular trends and increasing economic uncertainty may add incremental asset quality pressure.

M&T's IA of "A" has been assigned at midpoint of the Intrinsic Assessment Range, as we consider the as commensurate with those of similarly rated peers.

CREDIT RATING DRIVERS
If M&T further diversifies its loan portfolio, reducing the level of CRE loans and improving asset quality metrics, while maintaining strong earnings and capital levels, Morningstar DBRS would upgrade the credit ratings.

A further deterioration in asset quality, evidenced by NPLs and criticized loans remaining at elevated levels and NCOs increasing significantly beyond current levels, would result in a credit ratings downgrade. Additionally, prolonged negative operating leverage or a significant reduction in capital levels would also result in a credit ratings downgrade.

CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Strong/Good
The Company is a large regional banking company with $210 billion in total assets and leading market shares across its footprint.

M&T maintains a deeply entrenched commercial and retail banking franchise throughout the Northeast and Mid-Atlantic regions of the United States, underpinned by a large, relatively stable and low-cost deposit funding base. M&T also garners significant levels of non-interest income through a variety of business lines.

Earnings Combined Building Block Assessment: Strong / Good
M&T's earnings power remains strong, supported by a diverse set of businesses, which generate a solid level of fee income (26% of total revenue in Q1 2025). The Company's earnings power is supported by its strong net interest margin (NIM) and good efficiency levels. We note that M&T's NIM is higher than most peers as its loan portfolio is heavily weighted toward commercial and industrial (C&I) and CRE loans, along with its comparatively high amount of non-interest-bearing deposits.

Risk Combined Building Block (BB) Assessment: Good
M&T's loan portfolio is diversified but is overweight in CRE (20% of total loans). The Company has been actively reducing this exposure. Additionally, M&T has a long track record of conservative loan underwriting and disciplined workout culture, as evidenced by low, through the cycle, NCOs. NCO levels, while increasing, remain manageable, representing 0.40% of average loans over the last five quarters The Company is expecting NCOs to remain at approximately 40 basis points of average loans for FY2025, reflecting further normalization of consumer loans and improvements in commercial. At the end of Q1 2025, criticized C&I and CRE loans declined 27% year-over-year to $10.9 billion, representing a still somewhat elevated 10.9% of total loans in these categories.

Funding and Liquidity Combined Building Block Assessment: Strong
M&T's funding and liquidity is sound, underpinned by a sizable deposit base, substantial levels of on balance sheet liquidity, and ready access to additional liquidity. Deposits are granular with about 40% representing uninsured or noncollateralized deposits, with liquidity sources covering 134% of these balances, as of March 31, 2025.

Capitalization Combined Building Block Assessment: Strong / Good
Morningstar DBRS views the Company's capitalization as solid, especially considering its track record of maintaining strong earnings and manageable credit losses. M&T had a CET1 ratio of 11.5% as of March 31, 2025, up almost 50 basis points from the prior year period but has an 11% target for 2025. Management has prudently increased capital levels, given the uncertain environment, potential changes to capital rules, and elevated levels of criticized assets. With a current stress capital buffer of 3.8%, M&T's regulatory minimum CET1 ratio is 8.3%, which is higher compared with most regional bank peers.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://www.dbrsmorningstar.com/research/454004.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 4, 2024) https://dbrs.morningstar.com/research/433881. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.

The credit rating was not initiated at the request of the rated entity. The rated entity or its related entities did participate in the credit rating process for this credit rating action. Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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