) has continued its earning streak by delivering the fifth
consecutive earnings beat in first-quarter 2014. Lower provision
and prudent expense management drove earnings per share of 73
cents, which surpassed the Zacks Consensus Estimate by a penny.
Moreover, it compared favorably with 70 cents earned in the
Net income was $139 million in the quarter, up 3.7% from $134
million in the year-ago quarter.
Results benefited from a decline in both operating expenses and
provision for credit losses. However, the top line deteriorated
due to decrease in net interest income and non-interest income.
Nevertheless, the company's healthy capital position, improving
credit quality and strong capital deployment activities were
tailwinds for the quarter.
Furthermore, segment-wise, on a year-over-year basis, Retail
Bank's net income declined 10% to $9 million while Wealth
Management reported a 4.0% increase to $26 million. Further,
Business Bank segment's net income remained unchanged at $198
Performance in Detail
Comerica's total revenue of $643 million in the quarter was down
2.4% year over year. However, it beat the Zacks Consensus
Estimate of $614 million.
Comerica's net interest income decreased 1.4% year over year to
$410 million in the quarter. The decrease was primarily due to
lower interest income, partially offset by lower interest
expenses. Moreover, net interest margin declined 11 basis points
(bps) year over year to 2.77%. Comerica's non-interest income
came in at $208 million, down 2.3% from the prior-year quarter.
Non-interest expenses totaled $406 million, down 2.4% on a
year-over-year basis. The decrease was mainly due to a reduction
in salaries and employee benefits expense as well as other
Credit quality significantly improved at Comerica in the first
quarter. Net loan charge-offs fell 50.0% year over year to $12
million. Nonperforming assets to total loans and foreclosed
property was 0.76% in the quarter, down from 1.23% in the
Provision for credit losses declined 43.8% year over year to $9
million. The allowance for loan losses to total loans ratio was
1.28% as of Mar 31, 2014, down from 1.37% as of Mar 31, 2013.
For 2014, Comerica expects provisions for credit losses to remain
flat based on improvement in credit quality.
During the reported quarter, Comerica's capital levels remained
strong. As of Mar 31, 2014, total assets and common shareholders'
equity were $65.7 billion and $7.3 billion respectively, compared
with $64.9 billion and $7.0 billion as of Mar 31, 2013.
Net loans were up 3.3% year over year to $45.9 billion. Total
deposits rose 3.1% from the prior-year quarter to $53.8 billion.
As of Mar 31, 2014, Comerica's tangible common equity ratio was
10.20%, up 34 bps year over year. Moreover, the estimated Tier 1
common capital ratio moved up 17 bps year over year to 10.54%.
The estimated Tier 1 common ratio under fully phased-in Basel III
capital rules was 10.3% as of Mar 31, 2014, compared with 10.1%
in the prior-year quarter. This ratio excludes most factors of
accumulated other comprehensive income (AOCI).
Capital Deployment Update
Comerica's capital deployment initiatives through dividend
payment and share buybacks exhibit its capital strength. During
the reported quarter, Comerica repurchased 1.5 million shares
under the existing share repurchase program. This, combined with
dividends, resulted in total payout of 77% of first-quarter net
income to shareholders.
Outlook for 2014
Comerica has given an updated outlook for the year 2014. Given
the sluggish growth in economy and low-interest rate environment,
the company's outlook for 2014 is modest.
The company expects average loans to be flat in 2014 as compared
with 2013. The anticipation reflects stabilization in Mortgage
Banker Finance, which is expected to be near the average level of
fourth-quarter 2013 and continued focus on pricing and structure.
Further, Comerica expects lower net interest income in 2014 due
to persistent pressure from the low rate environment and decrease
in purchase accounting accretion. These negatives are expected to
be partially offset by loan growth.
Non-interest income is expected to drop due to lower non-customer
driven income. However, customer driven fee income is projected
to be flat. Comerica expects lower non-interest expense in 2014
on account of 50% reduction in pension expense and lower legal
Going forward, we expect synergies from Comerica's strategic
acquisitions to support its top-line growth. Moreover, the
company's efficient capital deployment activities in the form of
shares repurchase, regular payouts and dividend hikes seem
impressive as well.
Comerica maintains a strong capital position. Therefore, meeting
higher regulatory requirements will not be difficult for the
company. Further, approval of Comerica's 2014 capital plan
following the successful completion of Comprehensive Capital
Analysis and Review (CCAR) boosted investors' confidence.
Nevertheless, the sluggish economic scenario, still low rate of
interest and a stringent regulatory environment remain challenges
to the company's top-line growth in the coming quarters. Though
the pressure on NIM is likely to ease in the long run with
improvement in interest rates, we do not see any signs of respite
Currently, Comerica carries a Zacks Rank #3 (Hold).
Performance of Other Wall Street Majors
The earnings season this quarter started on low note with
JPMorgan Chase & Co.
) reporting significant earnings miss. Earnings per share of
$1.28 lagged the Zacks Consensus Estimate of $1.41 by a wide
margin. This time, it was not legal expense that weighed on
results but dreary consumer and corporate activities, soft
trading volumes and sluggish mortgage banking were the dampeners
Wells Fargo & Company
) delivered better-than-expected results driven by disciplined
cost containment and thereby restored investors' confidence to
some extent. While Wells Fargo's earnings per share of $1.05 beat
the Zacks Consensus Estimate by 8.3%, Citigroup's earnings per
share of $1.30 outpaced the Zacks Consensus Estimate by
CITIGROUP INC (C): Free Stock Analysis Report
COMERICA INC (CMA): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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