Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy

5. M&T Bank Corporation (NYSE:MTB)

Share Price Upside: 35%

Number of Hedge Fund Investors In Q2 2024: 34

M&T Bank Corporation (NYSE:MTB) is a New York based bank that provides services to retail, commercial, and institutional customers. Since it’s a bank, M&T Bank Corporation (NYSE:MTB) has to compete on the basis of its deposit costs, loan and asset portfolios, interest income, and geographical presence. The bank benefits from its fortress of a balance sheet, which had a whopping $208 billion in total assets as of December 2023. The high interest rate environment that has affected markets and the broader business environment has proven to be a boon for M&T Bank Corporation (NYSE:MTB). Its revenue grew from $5.9 billion to $9.3 billion between 2020 and 2023 to mark a strong 57% growth. The bank also benefits from a diversified loan portfolio as its presence in the consumer and industrial sectors reduces the risk that it faces from the struggling commercial real estate sector. M&T Bank Corporation (NYSE:MTB)’s CRE loans sat at $31.5 billion in Q2 after a 4% drop as a result of management efforts to reduce exposure.

M&T Bank Corporation (NYSE:MTB)’s management shared key CRE details during the Q2 2024 earnings call:

“We continue to manage our CRE concentration, with CRE as a percent of Tier 1 capital and allowance of 151% as of the end of the second quarter. Asset quality continues to improve with declines in non-accrual and criticized loans and net charge-offs in-line with expectations we laid out in the first quarter. M&T’s preliminary stress capital buffer declined 20 basis points to 3.8%, reflecting many of the factors just mentioned. Given the improvements in these factors, we plan to begin our share repurchase in the third quarter at a pace of $200 million per quarter through the end of the year. We expect to maintain our capital ratios at least at the current levels for the remainder of the year. We will continue to monitor the previously discussed factors as well as the revised Basel III proposal once made public and will adjust our capital return plans if necessary.”