M&T Bank CorporationMTBNYSE

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DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $284.65 per share(market-calibrated)

+30.0%

Upside to Fair Value

Current

$218.98

Pure Model

$290.10

Fair Value

$284.65

Bull Case

$302.36

Bear Case

$275.09

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

2.00%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $290.10.

What's Driving This Ratingfor MTB

↓

CapEx normalizing toward maintenance

Historical CapEx is 1.59% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$11M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 31.00% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects -18.84% revenue growth, fading to 2.50% by Year 10. Revenue reaches $12.7B (vs $12.3B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 74.61% indicates efficient cash generation. FCF reaches $3.3B by Year 10 (25.87% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.59

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.15%

Cost of Debt

Pre-tax Cost of Debt17.40%

Tax Rate22.78%

After-tax Cost of Debt13.43%

Equity Weight (E/V)73.25%

Debt Weight (D/V)26.75%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (73.25% × 7.15%) + (26.75% × 13.43%)

= 8.83%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$10.0B	$10.7B	$11.2B	$11.8B	$12.7B
EBIT	$3.1B	$3.3B	$3.5B	$3.7B	$3.9B
Tax	$705M	$754M	$794M	$834M	$898M
NOPAT	$2.4B	$2.6B	$2.7B	$2.8B	$3.0B
+ Depreciation	$367M	$392M	$413M	$434M	$467M
- Capex	$159M	$167M	$174M	$181M	$191M
- Δ NWC	-$232M	$31M	$27M	$29M	$31M
Free Cash Flow	$2.8B	$2.7B	$2.9B	$3.1B	$3.3B
Discount Factor	0.919	0.776	0.655	0.553	0.429
Present Value	$2.6B	$2.1B	$1.9B	$1.7B	$1.4B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.3B

Terminal Growth Rate2.50%

WACC8.83%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$53.3B

PV of Terminal Value$22.9B

Exit Multiple Method

Year 10 EBITDA$4.4B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$52.9B

PV of Terminal Value$22.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$18.9B

PV of Terminal Value$22.9B

Enterprise Value$41.7B

(-) Net Debt-$5.7B

Equity Value$47.5B

Shares Outstanding163M

Price per Share$290.58

Exit Multiple Method

PV of Projected FCFs$18.9B

PV of Terminal Value$22.7B

Enterprise Value$41.6B

(-) Net Debt-$5.7B

Equity Value$47.3B

Shares Outstanding163M

Price per Share$289.61

Pure Model Fair Value

$290.10

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
6.83%	$344.73	$355.54	$368.84	$385.61	$407.43
7.83%	$308.32	$315.25	$323.48	$333.41	$345.64
8.83%	$279.95	$284.65	$290.10	$296.47	$304.05
9.83%	$256.97	$260.30	$264.07	$268.40	$273.42
10.83%	$237.84	$240.26	$242.98	$246.04	$249.52

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$275.09

25.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.73

Base Case

$290.10

32.5% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.59

Bull Case

$302.36

38.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.50

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-18.84%

Year 3 Revenue Growth3.00%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin31.00%

Tax Rate22.78%

Historical Capex / Rev1.59%

Terminal Capex / Rev1.50%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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