DOW JONES NEWSWIRES
Comerica Inc.'s (CMA) second-quarter profit dropped 68% on weak
loan demand, but results widely surpassed muted expectations.
Regional banks like Comerica are tied to the housing market and
are more dependent on an improvement in the economy, as the firms
derive significant loan revenue from small businesses and local
construction. Weak jobs reports have been particularly damaging for
regional banks including Dallas-based Comerica, which has banking
units in Michigan, Arizona, Florida and California - four of the
hardest-hit states by the recession in the wake of the housing
bubble.
Chairman and Chief Executive Ralph Babb Jr. said the results
reflected the difficult economic environment, and in particular
challenges in the residential real-estate sector.
"While there are some signs the economy may be bottoming,
businesses and individuals are still feeling the effects of this
prolonged recession," he said, adding consumers remain
cautious.
Comerica posted income of $18 million, down from $56 million a
year earlier. On a per-share basis, which includes preferred-stock
dividends, the company posted a loss of 10 cents, compared with
year-ago earnings of 37 cents, when there were no preferred
dividends to be paid to the U.S. Treasury under the Troubled Asset
Relief Plan.
Revenue increased 2.3% to $700 million.
Analysts polled by Thomson Reuters expected a loss of 44 cents
on revenue of $606 million.
Comerica's credit-loss provision was $312 million, up 84% from a
year earlier and 54% from the first quarter. Net loan charge-offs
rose to 2.1% from 0.9% and 1.3%, respectively. Nonperforming assets
climbed to 2.6% from 1.4% and 2.2%.
Comerica's Tier 1 capital ratio, a key measure of financial
strength, rose to 11.6% from 7.5% a year earlier and 11.1% in the
first quarter. Its tangible common equity ratio, which measures how
much of a bank's hard assets its shareholders actually own, was
7.6%, up from 7.5% a year earlier and 7.3% in the prior
quarter.
The company said average loans fell in all markets and nearly
all of its businesses amid reduced demand from customers.
Earlier this month, Fitch Ratings cut its ratings on Comerica
one notch, saying it might be difficult for the company to be
profitable this year because of higher credit costs and depressed
net interest margin. Net interest margin, the difference between
what banks pay in interest and receive from loans, fell to 2.7%
from 2.9% a year earlier amid increased loan spreads and maturities
of higher-cost time deposits.
Comerica's shares closed Monday at $22.82 and were up to $23.00
premarket Tuesday.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com