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Comerica (CMA) Q1 Earnings & Revenues Miss, Fee Income Falls

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Comerica Inc. (CMA - Free Report) delivered a first-quarter 2022 earnings surprise of -0.72%. Earnings per share of $1.37 missed the Zacks Consensus Estimate of $1.38. Further, the bottom line came in lower than the prior-year quarter figure of $2.43.

CMA’s results were affected by a decline in revenues due to lower fee income. Higher expenses and a decline in deposits balance were other negatives. Nonetheless, decent net interest income (“NII”) and credit quality were tailwinds.

Net income attributable to common shares came in at $182 million in the quarter, plunging 47% year over year from $343 million.

Segment-wise, on a year-over-year basis, net income plunged 45.6% and 51.4% at Commercial Bank and Wealth Management, respectively. The Retail segment reported a net loss against a net income of $6 million in the prior-year quarter. The Finance segment reported a loss of $34 compared to $80 in the year-ago reported loss.

Revenues Fall, Expenses Increase

Comerica’s first-quarter total revenues were $700 million, down 1.8% year over year. Further, the top line lagged the consensus estimate of $721.5 million.

NII increased 3% on a year-over-year basis to $456 million in the quarter on higher interest-earning assets. The NIM contracted 10 basis points to 2.19%.

Total non-interest income was $244 million, down 10% on a year-over-year basis. Lower card fees, derivative income, letter of credit fees and other non-interest income mainly dragged the fee income.

Non-interest expenses totaled $473 million, up 6% year over year. The upswing resulted chiefly from higher salaries and benefit expenses, advertising expenses and other non-interest expenses.

The efficiency ratio was 66.91% compared with the prior-year quarter’s 62.59%. A rise in the ratio indicates lower profitability.

Decent Balance-Sheet Position

As of Mar 31, 2022, total assets and common shareholders' equity were $89.2 billion and $7 billion, respectively, compared with $86.3 billion and $8.2 billion each, as of Mar 31, 2021.

Total loans increased marginally on a sequential basis to $49.6 billion. However, total deposits declined 5.8% from the prior quarter’s level to $77.6 billion.

Decent Credit Quality

Total non-performing assets decreased 15.7% year over year to $274 million. The allowance for credit losses was $599 million, down from $807 million in the prior-year quarter. The allowance for loan losses to total loans ratio was 1.21% as of Mar 31, 2022, down from 1.59% as of Mar 31, 2021.

However, net credit-related charge-offs were $8 million compared with $3 million in the prior-year quarter. A benefit to provision for credit losses of $11 million was recorded in the reported quarter, substantially down from $182 million of benefit recorded in the prior-year quarter.

Weak Capital Position

As of Mar 31, 2022, CMA's tangible common equity ratio was 6.77%, down from 8.30% in the prior-year quarter. The total capital ratio was 12.04%, declining from 13.86% in the year-ago quarter.

Common Equity Tier 1 (CET1) capital ratio was 9.93%, falling from 11.02% in the prior-year quarter.

Solid Capital-Deployment Activities

In the reported quarter, Comerica returned $124 million to its shareholders through share repurchases and dividends. CMA repurchased $29 million of common stock under its share repurchase program and declared dividends of $89 million on its common stock and $6 million on its preferred stock.

Our Viewpoint

Comerica gave a weak performance in the first quarter. A restricted top-line expansion, eroded by a lower margin and fee income, and an elevated expense base, is concerning. Nonetheless, higher NII and decent credit quality acted as tailwinds. Decent balance sheet position is expected to continue supporting its financials.

Currently, Comerica carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

The PNC Financial Services Group, Inc. (PNC - Free Report) pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. However, the bottom line decreased 20% year over year.

Higher NII, driven by interest-earning assets and loan growth, were tailwinds for PNC Financial. However, higher expenses and a decline in deposits dragged results.

U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

First Republic Bank’s (FRC - Free Report) first-quarter 2022 earnings per share of $2 have surpassed the Zacks Consensus Estimate of $1.90. Additionally, the bottom line improved 11.7% from the year-ago quarter.

FRC’s results were supported by an increase in NII and non-interest income. The company’s capital position was strong in the quarter. Higher expenses and elevated provision for credit losses were the offsetting factors.