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Comerica (CMA) Q2 Earnings Surpass Estimates, NII Rises

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Comerica Incorporated (CMA - Free Report) reported second-quarter earnings per share of $1.92, beating the Zacks Consensus Estimate of $1.77. However, the bottom line came in lower than the prior-year quarter figure of $2.32.

The result reflected strong net interest income (NII) growth, high total loan balances and a significant decrease in non-performing assets. However, high expenses were an undermining factor.

Net income attributable to common shares came in at $255 million in the quarter, plunging 21% year over year from $321 million.

Revenues Rise, Expenses  Flare Up

Comerica’s second-quarter total revenues were $829 million, up 11% year over year. Further, the top line beat the consensus estimate of $805.5 million.

NII increased 21% on a year-over-year basis to $561 million in the quarter on higher short-term rates and volume of earning assets. NIM rose 55 basis points (bps) to 2.74%.

Total non-interest income was $268 million, down 6% on a year-over-year basis. The decrease in non-interest income was mainly due to a decrease in card fees.

Non-interest expenses totaled $482 million, up 4% year over year. The upswing resulted chiefly from higher salaries and benefit expenses, consulting fees, software expenses and operational losses.

The efficiency ratio was 58.03% compared with the prior-year quarter’s 61.72%. The decrease in the ratio indicates high profitability.

Balance-Sheet Position Mixed

As of Jun 30, 2022, total assets and common shareholders' equity were $86.89 billion and $6.04 billion, respectively, compared with $89.17 billion and $6.64 billion, as of Mar 31, 2022.

Total loans increased 4% on a sequential basis to $51.45 billion. However, total deposits declined 2.3% from the prior quarter’s level to $75.77 billion.

Credit Quality Improves

Total non-performing assets decreased 17% year over year to $266 million. The allowance for credit losses was $609 million, down from $683 million in the prior-year quarter. The allowance for credit losses to total loans ratio was 1.18% as of Jun 30, 2022, down from 1.36% as of Jun 30, 2021.

However, the company did not record any net credit-related charge-offs during the quarter compared with $11 million of recoveries in the prior-year quarter. A provision for credit losses of $10 million was recorded in the reported quarter against a benefit of $135 million in the prior-year quarter.

Weak Capital Position

As of Jun 30, 2022, CMA's tangible common equity ratio was 6.26%, down from 7.85% in the prior-year quarter. The total capital ratio was 11.75%, declining from 12.95% in the year-ago quarter.

Common Equity Tier 1 (CET1) capital ratio was 9.72%, falling from 10.35% in the prior-year quarter.

Our Viewpoint

Comerica came up with a decent performance in the second quarter of 2022. The rise in revenues was backed by high NII. Furthermore, the company’s credit quality improved from the prior-year quarter. However, a decrease in total deposits, weak capital position and rise in provision for credit losses were concerns.

Comerica Incorporated Price, Consensus and EPS Surprise

Comerica Incorporated Price, Consensus and EPS Surprise

Comerica Incorporated price-consensus-eps-surprise-chart | Comerica Incorporated Quote

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

Performance of Other Banks

Citigroup Inc.’s (C - Free Report) second-quarter 2022 income from continuing operations per share of $2.30 handily outpaced the Zacks Consensus Estimate of $1.67. However, the reported figure declined 19% from the prior-year quarter.

Citigroup witnessed growth in NII and non-interest revenues. However, declines in investment banking revenues, loans and deposits were spoilsports.

Truist Financial’s (TFC - Free Report) second-quarter 2022 adjusted earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.17. However, TFC’s bottom line declined 22.6% from the prior-year quarter.

TFC’s results were aided by average loan growth and higher rates, which drove NII. However, lower non-interest income and a rise in provisions were the major headwinds.


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