Comerica Reports Profit Decline but Tops Expectations
October 16 2015 - 8:30AM
Dow Jones News
Comerica Inc. said profit slid 12% in its latest quarter, as the
Dallas-based lender continued to grapple with sharply lower oil
prices and saw expenses rise.
Still, per-share earnings beat Wall Street expectations.
The regional bank reported a profit of $136 million, down from
$154 million a year earlier. On a per-share basis, earnings dropped
to 74 cents from 82 cents. Analysts anticipated 70 cents in profit
per share, according to Thomson Reuters.
Comerica does a chunk of its business in Texas and lends to many
companies in the energy sector, which has been hit with sharply
lower oil prices. With about 8% of its portfolio tied to energy,
the lender in July said it was braced for potential credit losses
stemming from the oil price slide.
On Friday, Comerica said it set aside $26 million for those
potential losses. That amount is up from $5 million a year earlier,
but it is also down sharply from the $47 million second-quarter
provision.
Comerica classified about $25 million of energy-related loans as
nonaccrual in the quarter, meaning there is uncertainty about
whether they will be paid back on time. That number came down from
about $100 million in the previous quarter. Net loan charge-offs
remained low, but rose $20 million to $23 million.
Fee-based income helped offset some of the drag stemming from
oil and from low interest rates. Many banks have worked to amp up
fee-based businesses to help counter the effect of low rates.
Noninterest income rose about 22% to $264 million in the third
quarter. Comerica said it expects growth in card fees to support
noninterest income this year.
Meanwhile, the lender's net interest margin, a key metric of
lending profitability that is tied to rates, slid to 2.54% from
2.65% in the second quarter and 2.67% a year earlier.
In the face of low rates and low oil, Chief Executive Ralph Babb
said the lender continues to tightly manage expenses. But the
lender had warned that expenses would rise this year, thanks in
part to contractual changes to a card program that prompted an
accounting change, and noninterest expenses in the latest quarter
jumped 16% to $461 million.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 16, 2015 08:15 ET (12:15 GMT)
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