M&T Bank sees ‘double-edged sword’ with higher interest rates

But those same elevated rates have prompted M&T to bolster its provision for credit losses, amid concerns about borrowers’ ability to pay back their loans.

“I think it really is driven by the Fed,” said Daryl Bible, M&T’s chief financial officer. “The Fed is raising interest rates to get inflation in the 2% area range. In order to do that, you basically have to reduce the demand that’s in the system.”

The effects of the Federal Reserve’s strategy are taking root, he said.

“You’re just seeing the economy slowing down and people are doing less, people are more cautious to invest in their business, invest in certain things,” Bible said. “People that have loans, it makes it harder for them to buy or do extra things because their interest payments are going up. So it’s a double-edged sword.”

During a conference call with analysts on Wednesday, Bible said the Fed has “probably reached the end of its [rate] hike cycle, given slower inflation and recent run-up in long-term rates.”

The Federal Reserve is scheduled to make its next decision about interest rates on Nov. 1. At its previous meeting, the Fed kept rates unchanged.

M&T on Wednesday reported third-quarter profits of $690 million, up 7% from $647 million a year ago. The bank reported diluted earnings per share of $3.98, topping average analysts’ estimates of $3.93.

The bank’s net interest income – from making loans and taking deposits – increased 6% from last year, to $1.78 billion. The higher interest rates enable M&T to charge more for loans.

Meanwhile, M&T’s provision for credit losses in the quarter was $150 million. That amount was unchanged from the second quarter but up $35 million from a year ago.

Other takeaways from M&T’s latest earnings report:

Strike impact. Bible said the effects of the United Auto Workers’ strike against the Detroit Three automakers hasn’t really filtered down…