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Subdued NII & Fee Income to Hurt Comerica's (CMA) Q1 Earnings
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Comerica Incorporated (CMA - Free Report) is scheduled to report first-quarter 2022 results before the opening bell on Apr 20. Although the bank’s earnings are likely to have declined from the year-ago reported figure, its revenues are likely to have increased.
Comerica’s earnings surpassed the Zacks Consensus Estimate in the fourth quarter of 2021. Results were supported by benefits from provisions and fee income growth. However, reduction in loan volumes, lower revenues and higher expenses were the downsides.
CMA has an impressive surprise history. Its earnings surpassed estimates in all the trailing four quarters, the average being 33.9%.
CMA’s activities in the to-be-reported quarter were inadequate to instill analysts’ confidence on the stock. Evidently, the Zacks Consensus Estimate of $1.38 for first-quarter earnings has remained flat in the past 30 days. The figure indicates a 43.2% fall from the year-ago quarter’s reported figure. The consensus estimate for revenues is pegged at $721.5 million, suggesting growth of 1.2% from the year-ago reported figure.
Factors at Play
Net Interest Income ("NII"): The ongoing economic expansion is expected to have supported the lending environment in the quarter under review. Per the Fed’s latest data, the commercial and industrial loans, consumer loans and real-estate loans were strong in the to be-reported quarter. This is likely to have aided the company’s first-quarter performance as the majority of its loan portfolio comprises of commercial and commercial mortgage loans.
In March 2022, CMA provided an update in a conference, stating that its loans balance of $48.1 billion, as of February end, increased in comparison with fourth-quarter 2021 figures. The company also has strong loan pipelines. Further, management anticipates average securities balance to increase by more than $500 million.
The Fed hiked interest rates in mid-March. However, the actual impact of the rate hike is not anticipated to have been much in the to-be-reported quarter. Thus, a persistently low-interest-rate environment is expected to have left an adverse impact on its NII in the quarter.
High liquidity in the balance sheet, low loan yields and low reinvestment rates on securities might have strained the earning asset yields. The Zacks Consensus Estimate of $86.6 billion for the quarterly average interest-earning assets indicates a 3.6% fall from the year-ago period’s reported figure, while the consensus mark for NII suggests a 2.2% fall from the prior-year reported number to $463 million.
Fee Income: Rising inflation and uncertainty over economic growth going forward, mainly due to the ongoing geopolitical concerns, are likely to have hurt consumer sentiments. This has likely had a negative impact on Comerica’s card fees (a major contributor to fee income in the fourth quarter of 2022). The Zacks Consensus Estimateof $67 million for card fees calls for a 5.6% fall from the prior-year reported number.
Deposits slowed in the quarter, likely due to a decrease in government aids and consumer savings. These are likely to have resulted in lower revenues from service charges on deposits. The Zacks Consensus Estimate for service charges on deposit accounts of $48.3 million indicates a fall of 3.5% from the year-ago reported figure.
The consensus estimate of $270 million for overall fee income suggests a 6.6% decline from the year-ago reported figure.
Expenses: The company continues to invest in its technology platform owing to its business initiatives. It is expected to have incurred higher expenses due to rising salaries on account of inflation. Such rising costs might weigh on its expense base to some extent in the quarter under review and hinder bottom-line growth.
Asset Quality: CMA was releasing reserves last year that it had built to cover losses from the effects of the coronavirus pandemic. However, with the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, the company might have released reserves at a slower level in the first quarter.
The consensus estimates for non-performing assets and loans in the to-be-reported quarter are pegged at $261 million and $260 million respectively, calling for a 3% decrease sequentially.
Now, let’s have a look at what our quantitative model predicts:
The chances of Comerica’s earnings beating the Zacks Consensus Estimate in the first quarter are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — that are required for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Comerica has an Earnings ESP of -0.27%.
Zacks Rank: Comerica currently carries a Zacks Rank #2 (Buy).
Stocks That Warrant a Look
Northern Trust Corporation (NTRS - Free Report) , M&T Bank (MTB - Free Report) and Associated Bancorp (ASB - Free Report) are a few banking stocks that you might want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for NTRS is +0.06% and the company carries a Zacks Rank #3 at present. NTRS is slated to report first-quarter 2022 results on Apr 26.
The Zacks Consensus Estimate for NTRS’s first-quarter earnings has moved 1.2% north over the past month.
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Subdued NII & Fee Income to Hurt Comerica's (CMA) Q1 Earnings
Comerica Incorporated (CMA - Free Report) is scheduled to report first-quarter 2022 results before the opening bell on Apr 20. Although the bank’s earnings are likely to have declined from the year-ago reported figure, its revenues are likely to have increased.
Comerica’s earnings surpassed the Zacks Consensus Estimate in the fourth quarter of 2021. Results were supported by benefits from provisions and fee income growth. However, reduction in loan volumes, lower revenues and higher expenses were the downsides.
CMA has an impressive surprise history. Its earnings surpassed estimates in all the trailing four quarters, the average being 33.9%.
Comerica Incorporated Price and EPS Surprise
Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote
CMA’s activities in the to-be-reported quarter were inadequate to instill analysts’ confidence on the stock. Evidently, the Zacks Consensus Estimate of $1.38 for first-quarter earnings has remained flat in the past 30 days. The figure indicates a 43.2% fall from the year-ago quarter’s reported figure. The consensus estimate for revenues is pegged at $721.5 million, suggesting growth of 1.2% from the year-ago reported figure.
Factors at Play
Net Interest Income ("NII"): The ongoing economic expansion is expected to have supported the lending environment in the quarter under review. Per the Fed’s latest data, the commercial and industrial loans, consumer loans and real-estate loans were strong in the to be-reported quarter. This is likely to have aided the company’s first-quarter performance as the majority of its loan portfolio comprises of commercial and commercial mortgage loans.
In March 2022, CMA provided an update in a conference, stating that its loans balance of $48.1 billion, as of February end, increased in comparison with fourth-quarter 2021 figures. The company also has strong loan pipelines. Further, management anticipates average securities balance to increase by more than $500 million.
The Fed hiked interest rates in mid-March. However, the actual impact of the rate hike is not anticipated to have been much in the to-be-reported quarter. Thus, a persistently low-interest-rate environment is expected to have left an adverse impact on its NII in the quarter.
High liquidity in the balance sheet, low loan yields and low reinvestment rates on securities might have strained the earning asset yields. The Zacks Consensus Estimate of $86.6 billion for the quarterly average interest-earning assets indicates a 3.6% fall from the year-ago period’s reported figure, while the consensus mark for NII suggests a 2.2% fall from the prior-year reported number to $463 million.
Fee Income: Rising inflation and uncertainty over economic growth going forward, mainly due to the ongoing geopolitical concerns, are likely to have hurt consumer sentiments. This has likely had a negative impact on Comerica’s card fees (a major contributor to fee income in the fourth quarter of 2022). The Zacks Consensus Estimateof $67 million for card fees calls for a 5.6% fall from the prior-year reported number.
Deposits slowed in the quarter, likely due to a decrease in government aids and consumer savings. These are likely to have resulted in lower revenues from service charges on deposits. The Zacks Consensus Estimate for service charges on deposit accounts of $48.3 million indicates a fall of 3.5% from the year-ago reported figure.
The consensus estimate of $270 million for overall fee income suggests a 6.6% decline from the year-ago reported figure.
Expenses: The company continues to invest in its technology platform owing to its business initiatives. It is expected to have incurred higher expenses due to rising salaries on account of inflation. Such rising costs might weigh on its expense base to some extent in the quarter under review and hinder bottom-line growth.
Asset Quality: CMA was releasing reserves last year that it had built to cover losses from the effects of the coronavirus pandemic. However, with the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, the company might have released reserves at a slower level in the first quarter.
The consensus estimates for non-performing assets and loans in the to-be-reported quarter are pegged at $261 million and $260 million respectively, calling for a 3% decrease sequentially.
Now, let’s have a look at what our quantitative model predicts:
The chances of Comerica’s earnings beating the Zacks Consensus Estimate in the first quarter are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — that are required for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Comerica has an Earnings ESP of -0.27%.
Zacks Rank: Comerica currently carries a Zacks Rank #2 (Buy).
Stocks That Warrant a Look
Northern Trust Corporation (NTRS - Free Report) , M&T Bank (MTB - Free Report) and Associated Bancorp (ASB - Free Report) are a few banking stocks that you might want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for NTRS is +0.06% and the company carries a Zacks Rank #3 at present. NTRS is slated to report first-quarter 2022 results on Apr 26.
The Zacks Consensus Estimate for NTRS’s first-quarter earnings has moved 1.2% north over the past month.
MTB is scheduled to release first-quarter results on Apr 20. MTB currently has a Zacks Rank #3 and an Earnings ESP of +5.43%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MTB’s first-quarter earnings has moved marginally south over the past week.
The Earnings ESP for ASB is +0.81% and the company carries a Zacks Rank #2 at present. ASB is slated to report first-quarter 2022 results on Apr 21.
The Zacks Consensus Estimate for ASB’s first-quarter earnings has moved 2.7% south over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.