Comerica Says Cost Savings Higher Than Expected
October 18 2016 - 9:42AM
Dow Jones News
By Austen Hufford
Comerica posted revenue and profit increases in its latest
quarter and said a cost-cutting plan would save more than
previously estimated.
Comerica Inc. said a previously announced plan to cut about 9%
of its workforce and close about 8% of its bank network would
increase profit by $40 million more than expected, driving pretax
benefits of about $180 million in 2017 and about $270 million in
2018. Around two-thirds of the workforce reduction will be
completed by year's end. In the quarter, Comerica took a $20
million restructuring charge.
In all, the 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.
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.
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.
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 interest margin, an important measure of lending
profitability largely tied to interest rates, was 2.66% in the
Sept. quarter, down from 2.74% in the quarter before 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 current, Comerica said it expects lower
noninterest expenses, excluding an estimated $30 million to $35
million in restructuring charges.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
October 18, 2016 09:27 ET (13:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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