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Commercial Loans Fuel Comerica's Earnings Beat (Update 2)

  • Comerica reports second-quarter earnings of 73 cents a share, beating the consensus estimate of 62 cents.
  • Average commercial loans grew 5% during the second quarter.
  • Net interest margin declined to 3.10% from 3.19% the previous quarter.

Updated with comments from Jefferies analyst Ken Usdin, FBR analyst Paul Miller, and market close information.

NEW YORK ( TheStreet) -- Comerica (CMA - Get Report) on Tuesday reported that its average commercial loans grew 5% during the second quarter, for its eighth consecutive quarter of growth for the coveted loan type.

The Dallas lender reported second-quarter net income attributed to common shares of 73 cents, soundly beating the consensus estimate of a 62-cent profit among analysts polled by Thomson Reuters.

In comparison, Comerica earned $129 million, or 66 cents a share, in the first quarter, and $95 million, or 53 cents a share, during the second quarter of 2011.

The company's shares rose 4% to close at $31.99.

Comerica's second-quarter bottom line was boosted by a $37 million release of loan loss reserves. The company had released $22 million in reserves the previous quarter, and $43 million a year earlier.

Despite seeing 2% growth in total average loans during the second quarter, Comerica's net interest income declined during the second quarter to $435 million, from $443 million the previous quarter, as "the benefit from an increase in average loans ($8 million) was offset by a decrease in the accretion of the purchase discount on the acquired Sterling loan portfolio ($7 million) and lower loan yields ($4 million)," according to the company. Comerica acquired Texas competitor Sterling Bancshares in July 2011.

The company's net interest margin -- the spread between its average yield on loans and investments and its average cost for deposits and wholesale borrowings -- declined to 3.10%, from 3.19% in the first quarter and 3.14% in the second quarter of 2011. Margins have been declining for most regional banks in the prolonged low-rate environment, as short-term interest rates remain at historically low levels, and long-term rates continue to decline.

Comerica's second-quarter earnings beat reflected a decline in noninterest expenses to $433 million, from $449 million the previous quarter, although expenses increased from $411 million a year earlier. The main factor in the second-quarter expense decline was the seasonal spike in employee compensation costs during the first quarter. Merger and restructuring charges totaled $8 million during the second quarter, and Comerica said that "restructuring charges of approximately $25 million to $30 million are expected to be incurred for the remainder of 2012."
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