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