M&T says it's monitoring impact of AI agents on deposits

• Key insight: M&T Bank CFO Daryl Bible downplayed the impact that consumers' increasing use of AI agents could have on banks' deposits.
• What's at stake: Following the recent release of Meta's Muse product, the potential for AI agents to accelerate deposit outflows has become a key topic among bankers and regulators.

A top M&T Bank executive said Friday the bank is monitoring the potential impact of third-party AI agents on deposit flows, but is not concerned about the technology at this point.

Processing Content

Speaking on the Buffalo, New York-based bank's third-quarter earnings call, Chief Financial Officer Daryl Bible said AI agents that are already in use could make it easier for customers to move deposits between institutions to maximize yields. But the bank has yet to see a significant effect on deposit flows, he said.

"We aren't really seeing much impact of actually money being moved out or anything yet," Bible said. He added that M&T is monitoring the situation "very closely."

Bible expects the potential impact to become less significant over time, as the technology matures.

"It's not going to be as much of a big deal," he said.

The potential for AI agents to accelerate deposit outflows has emerged as a recurring topic on third-quarter bank earnings calls and among banking regulators. The conversation kicked off last month following Meta's launch of its Muse agent.

JPMorgan Chase executives addressed the issue Tuesday, saying third-party AI agents do not fundamentally pose new competitive threats to the bank, though they could introduce risks for customers who rely on the tools to manage everyday tasks.

Federal Deposit Insurance Corp. Chair Travis Hill also weighed in on Wednesday, saying that while AI agents could make it easier to move money, their adoption does not necessarily mean most bank deposits will leave the system.

"It's something we're certainly watching very closely," Hill said.

Read more:

• BofA gets $1.21B penalty for money laundering
• Wells Fargo HUD probe signals risk for race-based lending
• Debanking makes a campaign stop in Kentucky
• Bankers grapple with liability when AI agents mess up
  

Hill said it remains an open question how willing individuals and businesses will be to delegate decisions about moving their money to AI tools. He also noted that businesses account for a significant share of deposits across the banking system and have numerous reasons for choosing particular banking relationships.
In a note Friday, Jaret Seiberg, managing director at TD Cowen, agreed that the risk of consumer-deposit outflows may be limited, but cautioned that regulators should examine the potential implications, as the risks could grow over time.

"What concerns us are not just AI agents. It is the marriage of AI agents with tokenized deposits, tokenized money funds, stable coins, and a potential Open Banking rule that could make it easier for consumers to disintermediate their bank," Seiberg wrote.

Third-quarter earnings

For the third quarter, M&T reported net income of $775 million, down 2% from the same quarter a year earlier. Net interest income rose 1.8% year over year to $1.79 billion.

Average commercial real estate loans and mortgage loans both increased 4% year over year, reaching $24.9 billion and $25.2 billion, respectively.

The growth in average CRE loans reflected strong loan originations in the third quarter, along with stable payoffs and paydowns, Bible said. Average consumer loans rose 5% year over year to $27.3 billion.

Average total deposits increased 2.6% year over year to $166.8 billion, driven by growth in commercial, mortgage and business banking. Bible said deposit growth allowed the bank to reduce its reliance on borrowing. Average short-term borrowings fell $2.8 billion to $5.2 billion.

The bank's provision for credit losses rose by 8% year over year to $135 million, and by 12.5% from the previous quarter.

M&T's net interest margin narrowed to 3.65% in the third quarter, down from 3.69% a year earlier.

Noninterest expenses rose to $1.39 billion from $1.36 billion a year earlier, driven by higher salary and benefit costs and increased spending on outside data processing and software. Software-related costs rose $19 million from the previous quarter, reflecting higher costs associated with software maintenance and enhancements to M&T's technology infrastructure.