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Comerica (CMA) Beats Q1 Earnings and Revenue Estimates
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Comerica Inc. (CMA - Free Report) delivered a positive earnings surprise of 1% in first-quarter 2017. Adjusted earnings per share of $1.02 surpassed the Zacks Consensus Estimate by a penny. The adjusted figure excludes a restructuring charge of 4 cents per share and tax benefit from employee stock transactions of 13 cents per share.
Better-than-expected results reflect higher revenues and lower expenses. Moreover, lower provisions and better credit quality were the tailwinds. However, decline in loans remains a concern.
Shares of Comerica inched up around 1.8% in the pre-market session, indicating that investors were bullish on the results. The price reaction during the full trading session will give a fair idea about the investors’ reactions over the results.
Net income came in at $202 million, up 239% year over year. This figure includes $24 million of tax benefits from employee stock transactions and a restructuring charge of $7 million.
Furthermore, segment wise, on a year-over-year basis, net income increased 92.4% at Business Bank and 9.5% at Wealth Management. However, Retail Bank segments remained stable year over year while the Finance segment recorded net loss in the quarter.
Revenues Up, Expenses Decline Slightly
Comerica’s net revenue for the quarter was $741 million, up 7.2% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $735.1 million.
Net interest income increased 5.1% on a year-over-year basis to $470 million. Moreover, net interest margin expanded 5 basis points (bps) to 2.86%.
Total non-interest income came in at $271 million, up 11.1% on a year-over-year basis. Increased card fees, fiduciary income and service charges on deposit accounts primarily led to the rise, partially countered by increase in deferred compensation asset returns.
Further, non-interest expenses totaled $461 million, slightly down year over year. The fall was chiefly due to lower salaries and benefits expense, partly offset by increased processing fees.
Loans Decline, Deposits Increase
As of Mar 31, 2017, total assets and common shareholders' equity were $73.0 billion and $7.9 billion, respectively, compared with $69.0 billion and $7.6 billion as of Mar 31, 2016.
Total loans were down 2.2% on a year-over-year basis, to $48.3 billion. However, total deposits increased 4.5% from the prior-year quarter to $58.9 billion.
Credit Quality Improves
Total non-performing assets decreased 23.7% year over year to $545 million. Also, allowance for loan losses was $708 million, down 2.2% from the prior-year period. Additionally, the allowance for loan losses to total loans ratio was 1.47% as of Mar 31, 2017, stable year over year.
However, net loan charge-offs plunged 43.1% on a year-over-year basis to $33 million. In addition, provision for credit losses declined 89.2% year over year to $16 million.
Capital Position Strengthens
While the company's tangible common equity ratio declined 16 bps year over year to 10.07% as of Mar 31, 2017, common equity Tier 1 capital ratio increased 96 bps to 11.54%. Total risk-based capital ratio was 13.80%, up from 12.84% in the prior-year quarter.
Capital Deployment Update
Notably, during the reported quarter, Comerica repurchased 1.5 million shares under its existing equity repurchase program. This, combined with dividends, resulted in a total payout of $105 million to shareholders.
Impressive Outlook for 2017
Comerica expects the current economic environment and the persistent low rates, along with the GEAR Up initiative, to result in $30 million in revenues and $125 million in expense savings in 2017.
The company anticipates higher net interest income, including the benefit of short-term rate increase, loan growth and debt maturities in Dec 2016 and Mar 2017. Notably, the recent rise in short-term rates is likely to be over $50 million for the upcoming quarters, assuming a 25% deposit beta.
Non-interest income is expected to increase 4–6%. The rise is expected on the GEAR Up opportunities, modest growth in treasury management and card fees, along with wealth management products, including fiduciary and brokerage services.
Non-interest expenses are predicted to be lower, excluding an estimated $25–$50 million restructuring expense. Notably, additional $125 million in GEAR Up savings is expected. Technology costs and typical inflationary pressure can be offsetting factors. Including restructuring charges, expenses are projected to decrease 4–5%.
Provision for credit losses is likely to remain low, with steady performance in overall portfolio. Notably, net charge-offs are expected to be in line with the reported quarter’s level while provisions are expected to be in the range of 30–40 bps.
Income tax expenses are anticipated to be approximately 33% of pre-tax income on the assumption of no tax impact from employee stock transactions.
Comerica expects average loan growth to be 1–2%. The management expects loan growth to be 3-4% if Mortgage Banker Finance and Energy segments are excluded.
Our Viewpoint
The company should benefit from its ongoing strategic initiatives. Additionally, its improving credit quality should support its financials in the quarters ahead. Further, the steady capital deployment activities through share repurchases and dividend hikes seem impressive. However, poor loan growth remains a headwind.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 8.9%, riding on higher revenues in first-quarter 2017 earnings. The company’s earnings per share of $1.35 for the quarter outpaced the Zacks Consensus Estimate of $1.24. Also, earnings compared favorably with the year-ago figure of $1.10 per share. Notably, results exclude one-time adjustments of 1 cent.
Among other finance stocks, Morgan Stanley (MS - Free Report) and U.S. Bancorp (USB - Free Report) are scheduled to report first-quarter 2017 earnings on Apr 19.
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Comerica (CMA) Beats Q1 Earnings and Revenue Estimates
Comerica Inc. (CMA - Free Report) delivered a positive earnings surprise of 1% in first-quarter 2017. Adjusted earnings per share of $1.02 surpassed the Zacks Consensus Estimate by a penny. The adjusted figure excludes a restructuring charge of 4 cents per share and tax benefit from employee stock transactions of 13 cents per share.
Better-than-expected results reflect higher revenues and lower expenses. Moreover, lower provisions and better credit quality were the tailwinds. However, decline in loans remains a concern.
Shares of Comerica inched up around 1.8% in the pre-market session, indicating that investors were bullish on the results. The price reaction during the full trading session will give a fair idea about the investors’ reactions over the results.
Net income came in at $202 million, up 239% year over year. This figure includes $24 million of tax benefits from employee stock transactions and a restructuring charge of $7 million.
Furthermore, segment wise, on a year-over-year basis, net income increased 92.4% at Business Bank and 9.5% at Wealth Management. However, Retail Bank segments remained stable year over year while the Finance segment recorded net loss in the quarter.
Revenues Up, Expenses Decline Slightly
Comerica’s net revenue for the quarter was $741 million, up 7.2% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $735.1 million.
Net interest income increased 5.1% on a year-over-year basis to $470 million. Moreover, net interest margin expanded 5 basis points (bps) to 2.86%.
Total non-interest income came in at $271 million, up 11.1% on a year-over-year basis. Increased card fees, fiduciary income and service charges on deposit accounts primarily led to the rise, partially countered by increase in deferred compensation asset returns.
Further, non-interest expenses totaled $461 million, slightly down year over year. The fall was chiefly due to lower salaries and benefits expense, partly offset by increased processing fees.
Loans Decline, Deposits Increase
As of Mar 31, 2017, total assets and common shareholders' equity were $73.0 billion and $7.9 billion, respectively, compared with $69.0 billion and $7.6 billion as of Mar 31, 2016.
Total loans were down 2.2% on a year-over-year basis, to $48.3 billion. However, total deposits increased 4.5% from the prior-year quarter to $58.9 billion.
Credit Quality Improves
Total non-performing assets decreased 23.7% year over year to $545 million. Also, allowance for loan losses was $708 million, down 2.2% from the prior-year period. Additionally, the allowance for loan losses to total loans ratio was 1.47% as of Mar 31, 2017, stable year over year.
However, net loan charge-offs plunged 43.1% on a year-over-year basis to $33 million. In addition, provision for credit losses declined 89.2% year over year to $16 million.
Capital Position Strengthens
While the company's tangible common equity ratio declined 16 bps year over year to 10.07% as of Mar 31, 2017, common equity Tier 1 capital ratio increased 96 bps to 11.54%. Total risk-based capital ratio was 13.80%, up from 12.84% in the prior-year quarter.
Capital Deployment Update
Notably, during the reported quarter, Comerica repurchased 1.5 million shares under its existing equity repurchase program. This, combined with dividends, resulted in a total payout of $105 million to shareholders.
Impressive Outlook for 2017
Comerica expects the current economic environment and the persistent low rates, along with the GEAR Up initiative, to result in $30 million in revenues and $125 million in expense savings in 2017.
The company anticipates higher net interest income, including the benefit of short-term rate increase, loan growth and debt maturities in Dec 2016 and Mar 2017. Notably, the recent rise in short-term rates is likely to be over $50 million for the upcoming quarters, assuming a 25% deposit beta.
Non-interest income is expected to increase 4–6%. The rise is expected on the GEAR Up opportunities, modest growth in treasury management and card fees, along with wealth management products, including fiduciary and brokerage services.
Non-interest expenses are predicted to be lower, excluding an estimated $25–$50 million restructuring expense. Notably, additional $125 million in GEAR Up savings is expected. Technology costs and typical inflationary pressure can be offsetting factors. Including restructuring charges, expenses are projected to decrease 4–5%.
Provision for credit losses is likely to remain low, with steady performance in overall portfolio. Notably, net charge-offs are expected to be in line with the reported quarter’s level while provisions are expected to be in the range of 30–40 bps.
Income tax expenses are anticipated to be approximately 33% of pre-tax income on the assumption of no tax impact from employee stock transactions.
Comerica expects average loan growth to be 1–2%. The management expects loan growth to be 3-4% if Mortgage Banker Finance and Energy segments are excluded.
Our Viewpoint
The company should benefit from its ongoing strategic initiatives. Additionally, its improving credit quality should support its financials in the quarters ahead. Further, the steady capital deployment activities through share repurchases and dividend hikes seem impressive. However, poor loan growth remains a headwind.
Comerica Incorporated Price and EPS Surprise
Comerica Incorporated Price and EPS Surprise | Comerica Incorporated Quote
Currently, Comerica has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 8.9%, riding on higher revenues in first-quarter 2017 earnings. The company’s earnings per share of $1.35 for the quarter outpaced the Zacks Consensus Estimate of $1.24. Also, earnings compared favorably with the year-ago figure of $1.10 per share. Notably, results exclude one-time adjustments of 1 cent.
Among other finance stocks, Morgan Stanley (MS - Free Report) and U.S. Bancorp (USB - Free Report) are scheduled to report first-quarter 2017 earnings on Apr 19.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>