CMA Comerica Inc

Comerica Inc. said it would cut about 9% of its workforce and shut down 40 of its locations in a move to cut costs and increase profitability, as the bank works to recover from energy-related weakness and lowered profitability across the banking sector.

The regional bank is taking $53 million in severance-related expenses and professional-service charges in the quarter related to the cost-cutting and revenue-enhancing initiative. Comerica estimates it will result in $70 million in revenue increases by the end of 2018 and $160 in cost reductions. The company will take restructuring charges of between $140 million and $160 million in total through 2018.

Comerica said the closures would represent about 8% of its total 473-bank network.

The regional bank reported a quarterly profit of $104 million, down from $135 million a year prior. On a per-share basis, earnings fell to 58 cents from 73 cents. The bottom line includes 19 cents a share of charges related to the cost-cutting plans.

Revenue, a combination of net interest income and noninterest income, rose 5.2% to $714 million.

Analysts polled by Thomson Reuters had anticipated 69 cents in per-share profit on $715 million in revenue.

In April, Comerica said it hired a consultant group to help it undergo a review of its expenses and revenues. That resulted in the plans released Tuesday.

Comerica does a chunk of its business in Texas and lends to many companies in the energy sector, who have been hit by the decline in energy prices, said its customers have worked to reduce their bank debt. The bank said its energy loans had declined by $356 million from the previous quarter.

Comerica had $550 million of nonaccrual loans in the quarter, meaning there is uncertainty about whether they will be paid back on time. The bank reported $284 million in nonaccrual loans in the year prior and $627 million in the previous quarter.

Net interest margin, an important measure of lending profitability largely tied to interest rates, came in at 2.74% in the June quarter, down from 2.81% in the quarter before and up from 2.65% a year prior. Net interest income increased 5.7% from the same quarter a year before on higher yields from loans and Federal Reserve deposits and asset growth.

Fee-based income increased in the quarter. Noninterest income grew 4.3% to $269 million in the second quarter on increased card fees from merchant payment processing services and government card programs.

Higher software expenses and FDIC insurance premiums drove noninterest expenses up 19.9% to $519 million. The double-digit percent increase also includes the restructuring charge.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

July 19, 2016 08:35 ET (12:35 GMT)

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