M&T Bank (MTB) is offering limited positive catalysts in the near term amid lower rates, Morgan Stanley said in a note Monday.

"With rates coming down, we see fewer positive catalysts in the near-term," the report said. "We are moving to the sidelines in favor of other opportunities in our coverage."

The report said M&T has been successfully executing on its strategy to decrease criticized assets and release excess capital, backing higher dividends and buybacks.

The note also pointed to the bank as relatively neutral to interest rates, expecting less room for net interest margin expansion relative to other banks in the group.

"Incremental improvement on criticized loans from here will likely be less of a tailwind for the stock, now that criticized

loans are back at 1Q21 levels," the report said.

Morgan Stanley downgraded M&T to equal-weight from overweight while raising its price target to $251 from $236.

Price: 197.10, Change: -3.04, Percent Change: -1.52