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Comerica Beats Estimates but Loan Growth Slows

Comerica added $13 million to loan loss reserves during the second quarter, down from $16 million the previous quarter and $19 million a year earlier, as credit quality continued to improve. Nonperforming assets, including loans in nonaccrual status and repossessed property totaled $500 million as of June 30, declining from $555 million in March and $814 million in June 2012.

Certain changes in the Federal Reserve's finalized capital rules on July 2, along with the bank's earnings, helped boost Comerica's estimated Basel III Tier 1 common equity ratio to a very strong 10.04% as of June 30, increasing from 9.86% at the end of the first quarter.

While Comerica's net income was flat year over year, earnings-per-share rose because of a lower share count. During the second quarter, the company bought back 1.9 million shares. Comerica in March was approved by the Federal Reserve for up to $288 million in common share repurchases through the first quarter of 2014.

The company said that during the second quarter, 72% of earnings were returned to investors through dividends and share buybacks.

Comerica's shares were down 2% in early trading Tuesday to $40.82.

"2Q results beat consensus due to lower provision expense, better core fees, and continued tight expense controls," wrote Jefferies analyst Ken Usdin in a note to clients Monday. "We believe estimates should have a slight upward bias as these items modestly reset in our model."

Usdin rates Comerica a "hold," with a $41 price target, estimating the company will earn $2.80 a share this year, with EPS climbing to $2.85 in 2014.

The analyst called the company's loan growth "somewhat soft," but noted that "average mortgage banker [loans] increased to $1.8B )vs. $1.7B in 1Q)."

Comerica's shares closed at $41.56 Monday, returning 38% this year, following a 20% return during 2012. The shares trade for 1.2 times their reported June 30 tangible book value of 33.79, and for 14.5 times the consensus 2014 earnings estimate of $2.86. The consensus 2013 EPS estimate is $2.81.

Based on a quarterly payout of 17 cents, the shares have a dividend yield of 1.64%.

CMA Chart CMA data by YCharts

Interested in more on Comerica? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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