M
&T Bank is taking steps to distance itself from the risks associated with commercial real estate, a strategy many regional lenders aim to achieve. In the third quarter, M&T reduced its share of distressed commercial real estate loans, cut its reserves set aside for CRE losses, and decreased its exposure to the asset class. This move boosted profits and improved the mood of the bank's chief financial officer, Daryl Bible.

    Bible attributes the improvement to lower interest rates, which have allowed borrowers to pay down or pay off loans and move mortgages out of the "criticized" category. The share of criticized loans in M&T's CRE loan book dropped to 23.4% from 25.6% in the quarter. Despite reducing its commercial real estate exposure by 8% to $29.1 billion, the bank reported a decline.

    If the Federal Reserve continues to lower rates as expected, borrowers will be in an even better position, potentially benefiting M&T's loan book. However, Bible didn't rule out a "mild recession," and some analysts suspect the labor market may be weaker than reported numbers indicate. The office sector remains a challenge for regional lenders, with M&T reporting its share of office loans at risk of default rose to 30% from 27% in the second quarter.

    M&T cut its provision for credit losses by $30 million quarter-over-quarter and year-over-year, aiding profits. The bank reported diluted earnings of $4.02 per share, a 10% increase from the previous quarter and a 4.5% bump year-over-year. Given projections of further rate cuts, Bible said M&T may boost its loss reserves as it shifts focus to consumer debt, which tends to come with higher losses.