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Comerica Reports Strong Commercial Loan Growth (Update 1)

  • Comerica reported first-quarter earnings per share of 66 cents.
  • Analysts were expecting EPS of 55 cents.
  • Average commercial loans grow by $1.2 billion, or 5%, sequentially.

Updated with comments from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- Comerica (CMA - Get Report) on Tuesday reported another quarter of strong commercial loan growth.

The Dallas lender reported first-quarter net income of $130 million, or 66 cents a share, increasing from $96 million, or 48 cents a share, during the fourth quarter, and $103 million, or 57 cents a share, during the first quarter of 2011. The fourth-quarter results included $37 million in restructuring charges associated with the purchase of Sterling Bancshares last July.
Comerica CEO Ralph W. Babb Jr.

The first-quarter earnings beat the 55-cent estimate among analysts polled by Thomson Reuters.

The year-over-year earnings improvement reflected a 21% increase in net interest income, to $443 million in the first quarter, partially reflecting the Sterling acquisition, and a decline in the provision for loan losses to $23 million in the first quarter from $49 million a year earlier.

A $22 million release of loan loss reserves during the first quarter, directly boosted operating results.

Average total loans totaled $42.3 billion as of March 31, growing 2% from the end of the fourth quarter. Average commercial loans grew 5% during the quarter to $24.7 million.

CEO Ralph Babb said "the increase in average commercial loans, when compared to the fourth quarter of 2011, was broad-based, across a majority of business lines and all major markets." During the fourth quarter, Babb had said the company's 8% commercial loan growth was mainly "in National Dealer Services, Mortgage Banker Finance, Energy Lending, Technology and Life Sciences, and Global Corporate Banking."

The company's first-quarter net interest margin -- the difference between a bank's average yield on loans and investments and its average cost of funds -- was 3.19%, which was unchanged from the fourth quarter, while declining from 3.25% a year earlier.

Noninterest income "increased $24 million [from the fourth quarter, to $206 million] driven by a $10 million, or 6%, increase in customer-driven fees, offsetting the headwinds of regulatory reform," according to Babb. During the first quarter of 2011, noninterest income totaled $201 million.

Noninterest expense totaled $448 million during the first quarter, declining from $478 million the previous quarter -- which included the $37 million in restructuring expenses from the Sterling acquisition -- and from $460 million a year earlier. The year-over-year expense reduction included a 50% decline in Federal Deposit Insurance Corp. premiums, to $10 million in the first quarter.
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