) reported fourth quarter 2012 earnings of 68 cents per share,
beating the Zacks Consensus Estimate of 64 cents. Moreover,
results surpassed the earnings per share of 61 cents reported in
the prior quarter.
Comerica's results reflected growth in its top line along with
reduced expenses. Further, growth in average loans and average
deposits coupled with improved credit metrics continued to be a
positive. However, a decline in the net interest income was the
The company reported a net income of $130.0 million, up 11.1%
from $117.0 million recorded in the prior quarter. For full year
2012, Comerica reported a net income attributable to common
shareholders of $515 million or $2.67 per share, beating the
Zacks Consensus Estimate of $2.65 per share and up from $389
million or $2.09 per share in 2011.
Comerica's total revenue of $660 million in the reported
quarter went up modestly by 0.5% sequentially. Moreover, it
surpassed the Zacks Consensus Estimate of $620 million.
For full year 2012, Comerica reported total revenues of $2.7
billion, up 3.8% year over year and above the Zacks Consensus
Estimate of $2.5 billion.
Quarter in Detail
Comerica's net interest income inched down 0.7% sequentially
to $424 million. The decline was mainly due to a continued shift
in the mix of the loan portfolio, a decline in LIBOR, a decrease
in the accretion of the purchase discount on the acquired
Sterling loan portfolio and a decline in interest earned on
investment securities available-for-sale. These negatives were
partially mitigated by lower funding costs and an increase in
Net interest margin fell 9 basis points (bps) sequentially to
2.87%. The sequential decline was mainly due to a continued shift
in mix in the loan portfolio, lower yields on mortgage-backed
securities, a decline in LIBOR, increased excess liquidity, and
lower accretion on the acquired Sterling loan portfolio. These
negatives were partly offset by a negative residual value
adjustment of 2 bps in the third quarter of 2012 and lower
Average loans marginally grew 1.2% to $44.1 billion
sequentially. This was driven by an increase in commercial loans,
partially offset by a decrease in commercial real estate loans
(commercial mortgage and real estate construction loans). Average
deposits increased 2.9% from the prior quarter to $51.3, largely
attributable to an increase of 6.0% in non-interest bearing
Comerica's non-interest income came in at $204 million, up
3.6% sequentially. The sequential rise was mainly attributable to
increases in customer driven categories, including commercial
lending fees, customer derivative income and fiduciary income,
partially mitigated by a decline in letter of credit fees.
Non-interest expenses totaled $427 million, down 4.9%
sequentially. The decrease was mainly due to a decline in
restructuring expenses, lower legal fees and reduced employee
benefits expense, partly offset by a hike in severance expense.
Notably, non-interest expenses were reduced by $6 million in the
third quarter of 2012 due to gains on sales of assets.
Credit quality improved at Comerica. Net credit-related
charge-offs declined 14.0% sequentially and 38.3% year over year
to $37 million.
Nonperforming assets to total loans and foreclosed property
equaled 1.27% in the reported quarter, down from 1.71% in the
prior quarter and 2.29% in the year-ago quarter.
Provision for credit losses declined 27.3% sequentially and
11.1% year over year to $16 million. The allowance for loan
losses to total loans ratio was 1.37% as of Dec 31, 2012, down
from 1.46% as of Sep 30, 2012, and 1.70% as of Dec 31, 2011.
For the year 2013, Comerica expects stable provision for
credit losses, attributable to loan growth offset by a decline in
nonperforming loans and net charge-offs.
During the reported quarter, Comerica's capital levels
remained strong. As of Dec 31, 2012, total assets and common
shareholders' equity were $65.4 billion and $6.9 billion,
respectively, up from $63.3 billion and $7.1 billion,
respectively, as of Sep 30, 2012.
As of Dec 31, 2012, Comerica's tangible common equity ratio
was 9.71%, down 54 bps sequentially. Moreover, as of Dec 31, 2012
the estimated Tier 1 common capital ratio moved down 24 bps
sequentially to 10.11%.
Capital Deployment Update
Comerica's capital deployment initiatives, through dividend
payment and share buybacks, exhibit its capital strength. During
the reported quarter, Comerica had bought back 3.1 million shares
for $93 million under its current share repurchase authorization.
This, combined with dividend, resulted in a total payout of 93%
of net income to shareholders in the fourth quarter. We expect
such activities to further boost investors' confidence in the
Comerica has provided a detailed outlook for 2012. Given the
continuation of the current economic environment, the company's
outlook for full year 2013 is a modest one. Compared to the full
year 2012 level, management expects reduced net interest income,
attributable to a decline of $40 million-$50 million in purchase
accounting accretion and the effect of a low rate environment,
partially mitigated by loan growth.
Customer-driven non-interest income is projected to increase
based on cross-sell initiatives and selective pricing
adjustments. Further, non-interest expenses are anticipated to
fall due to cost savings based on tight expense control and no
restructuring expenses. Income tax expense is anticipated to be
roughly 36.5% of pre-tax income.
One of the other big Wall Street players,
Wells Fargo & Company
), started the earnings season this time and achieved its twelfth
consecutive quarter of growth in earnings per share by reporting
earnings of 92 cents in fourth quarter 2012. Results improved
from earnings per share of 88 cents reported in the prior quarter
and 73 cents in the year-ago quarter. Also, it beat the Zacks
Consensus Estimate by 5 cents.
Results at Wells Fargo benefited from improvement in top line,
aided by an increase in all segments' revenue. It also reported
$250 million in reserve release (pre-tax), attributable to
improved portfolio performance. On the flip side, the company
experienced a rise in non-interest expenses.
Going forward, we believe Comerica's continuous geographic
diversification beyond its traditional and slower-growing Midwest
markets could drive growth over the next cycle. Revenue synergies
from the Sterling acquisition should augment its top-line growth.
Further, the company's capital deployment activities augur well
Yet, the company's significant exposure to commercial real
estate markets, the unsettled economic environment, low interest
rate and stringent regulatory issues are matters of our
Comerica currently retains a Zacks Rank #3 (Hold).
COMERICA INC (CMA): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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