Comerica's (CMA) Q2 Earnings, Revenues Beat Estimates
Comerica Incorporated CMA reported a positive earnings surprise of 7.5% in second-quarter 2017. Adjusted earnings per share of $1.15 surpassed the Zacks Consensus Estimate of $1.07. The adjusted figure excludes restructuring charges and tax benefit from employee stock transactions.
Better-than-expected results reflect higher revenues and lower expenses. Moreover, lower provisions and better credit quality were the tailwinds. A strong capital position was another positive.
Adjusted net income came in at $206 million, up 50.4% year over year. This figure includes $5 million of tax benefits from employee stock transactions and a restructuring charge of $9 million.
Segment wise, on a year-over-year basis, net income increased 19.2% at Business Bank and 76.9% at Wealth Management. Retail Bank segment reported net income of $16 million against a net loss of $2 million in the prior-year quarter. However, the Finance segment recorded net loss in the quarter.
Revenues Improve, Expenses Decline
Comerica’s net revenue for the quarter was $776 million, up 8.8% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $770.8 million.
Net interest income increased 12.4% on a year-over-year basis to $500 million. Moreover, net interest margin expanded 29 basis points (bps) to 3.03%.
Total non-interest income came in at $276 million, up 3.0% on a year-over-year basis. Increased card fees, fiduciary income and service charges on deposit accounts primarily led to the rise.
Further, non-interest expenses totaled $457 million, down 11.8% year over year. The fall was chiefly due to lower salaries, benefit expenses and restructuring charges, partly offset by increased processing fees and other expenses.
Loans Increase, Deposits Decline
As of Jun 30, 2017, total assets and common shareholders' equity were $71.4 billion and $8.0 billion, respectively, compared with $73.0 billion and $7.9 billion as of Mar 31, 2017.
Total loans were up 2.3% on a sequential basis, to $49.4 billion. However, total deposits decreased 3.5% from the previous quarter to $56.8 billion.
Credit Quality Improves
Total non-performing assets decreased 18.3% year over year to $519 million. Also, allowance for loan losses was $705 million, down 3.3% from the prior-year period. Additionally, the allowance for loan losses to total loans ratio was 1.43% as of Jun 30, 2017, down 2 bps year over year.
Further, net loan charge-offs declined 61.7% on a year-over-year basis to $18 million. In addition, provision for credit losses declined 65.3% year over year to $17 million.
Capital Position Strengthens
The company's tangible common equity ratio improved 39 bps year over year to 10.37% as of Jun 30, 2017. Further, common equity Tier 1 and tier 1 risk-based capital ratio was 11.51%, up from 10.49% in the prior-year quarter. Total risk-based capital ratio was 13.66%, up 92 bps from the prior-year quarter.
Capital Deployment Update
Notably, during the reported quarter, Comerica repurchased 2 million shares under its existing equity repurchase program. This, combined with dividends, resulted in a total payout of $185 million to shareholders.
Impressive Outlook for 2017
Comerica provided following guidance for 2017 assuming continuation of the current economic environment and the persistent low rates, along with contributions from the GEAR Up initiative of $30 million in revenues and $125 million in expense savings: