Comerica's earnings grew in the third quarter, beating Wall Street expectations as concerns about
energy loans receded.
The Dallas-based regional bank reported a profit of $149 million, up from $136 million in the same period a year ago.
On a per-share basis, earnings grew to 84 cents from 74 cents.
In all, revenue in the third quarter, a combination of net interest income and noninterest income, rose 5.9% to $722
million. Analysts polled by FactSet had anticipated 74 cents in per-share profit and $720.9 million in revenue.
In recent quarters the energy issues, combined with flagging profitability metrics and a balance sheet positioned for
rate increases that haven't materialized, got the bank into hot water with some investors. This came to a head at the
bank's annual meeting in April, when several shareholders spoke up in an unusual show of dissent.
But since then, rising energy prices and new, aggressive cost-cutting plans have helped Comerica. Shares are up 18% so
far in 2016 including a 3% rise after the Tuesday earnings report, beating the performance of other regionals.
Comerica also said Tuesday it found $40 million in additional savings through the previously announced plan, which
includes cuts to about 9% of its workforce and the closure about 8% of its bank network. Around two-thirds of the
workforce reduction will be completed by year's end. In the quarter, Comerica took a $20 million restructuring charge.
Comerica, which does a chunk of its business in Texas and lends to many companies in the energy sector, has continued
to reduce its exposure to energy loans, which are now 5% of its total portfolio, even as they have stabilized. The bank
had $2.5 billion in energy business loans compared with $2.7 billion in the previous quarter. The company took energy
net charge-offs of $6 million in the quarter, compared with $32 million in the previous quarter.
"The companies were very quick to react in the right way and do the right things," Comerica CEO Ralph W. Babb Jr said.
The decline in energy and other business weighed on the bank's loans, which fell slightly from the prior quarter.
Across the banking industry, business lending contracted in the quarter for the first time in six years, the Journal
reported last week.
Comerica had $631 million of nonaccrual loans in the third quarter, meaning there is uncertainty about whether they
will be paid back on time. The bank reported $357 million in nonaccrual loans in the year prior and $605 million in the
previous quarter. Net charge-offs were 0.13% of total loans, down from 0.38% in the prior quarter.
Net interest margin, an important measure of lending profitability largely tied to interest rates, was 2.66% in the
September quarter, down from 2.74% in the second quarter and up from 2.54% a year prior.
Net interest income increased 6.6% from the same quarter a year before on higher yields on loans and Federal Reserve
deposits and earning asset growth.
Fee-based income increased 4.6% to $272 million in the third quarter on an increase in deferred compensation asset
returns, card fees and commercial lending fees.
Noninterest expenses rose 7.9% to $493 million on the restructuring and increases in deferred compensation, software
expenses and FDIC insurance premiums.
For the fourth quarter, Comerica said it expects lower noninterest expenses, excluding an estimated $30 million to $35
million in restructuring charges.
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