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Comerica Shares Strong Following Earnings Beat

NEW YORK ( TheStreet) -- Shares of Comerica (CMA - Get Report) of Dallas were up nearly 2% in early trading on Friday, after the bank reported better-than-expected fourth-quarter results.

Comerica reported fourth-quarter net income of $145 million, or 77 cents a share, compared to $147 million, or 78 cents a share, during the third quarter, and $130 million, or 68 cents a share, during the fourth quarter of 2012.

Analysts polled by Thomson Reuters on average had estimated the bank's fourth-quarter EPS would come in at 74 cents.

While the company emphasized that period-end loans had increased $1.3 billion during the fourth quarter from the third quarter, average loans actually declined slightly quarter-over-quarter and year-over-year, to $44.054 billion during the fourth quarter.  The strongest category for growth of average loans was real estate construction loans, which were up 9% sequentially and 27% year-over-year to $1.652 billion during the fourth quarter.

A bright spot for Comerica was in increase in net interest income to $430 million during the fourth quarter from $412 million the previous quarter and $424 million a year earlier.  The company's net interest margin bucked the industry trend, expanding to 2.86% during the fourth quarter from 2.79% in the third quarter, although it was down slightly from 2.87% a year earlier. 

But the main factor in the increase in net interest income was accretion on acquired loans, which had been purchased at discounts.  The accretion increased to $23 million during the fourth quarter from $8 million the previous quarter and $13 million a year earlier.

Noninterest income totaled $204 million during the fourth quarter, down from $214 million in the third quarter but unchanged from a year earlier.  The sequential decline reflected "decreases of $5 million in customer-driven fee income and $5 million in noncustomer-driven income," the company said.

Noninterest expense totaled $151 million during the fourth quarter, compared to $153 million the previous quarter and $149 million a year earlier.

Jefferies analyst Ken Usdin in a note to clients described Comerica's results as "OK, with fees a little soft and expenses a little higher. The '14 outlook looks decent, as period-end loans were up 3% vs. flat on average and expenses will benefit from a 50%+ reduction in pension costs vs. 2013."

Usdin rates Comerica a "hold," with a $46 price target.

This chart shows the performance of Comerica's stock against the KBW Bank Index (I:BKX) and the S&P 500 since the end of 2011:

CMA Chart data by YCharts


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

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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