on Wednesday reported second-quarter net income attributable to common shareholders of $69 million, or 39 cents a share, exceeding the consensus estimate among analysts polled by Thomson Reuters of 23 cents.
The holding company posted a net loss to common shareholders of $71 million, or 46 cents a share, for the first quarter, and a net loss to common shareholders of $16 million, or 11 cents a share, for the second quarter of 2009. The figures for those previous periods excluded dividends on $2.25 billion in preferred shares held by the Treasury for bailout money received via the Troubled Assets Relief Program, or TARP.
Comerica issued $880 million in common shares in March and redeemed all the TARP preferred shares, saving the company about $34 million in dividend payments per quarter.
Comerica achieved its best earnings performance in over two years as its nonperforming assets declined and its provision for loan losses declined to $126 million from $175 million in March and $312 million a year earlier.
Comerica had $55 billion in total assets as of June 30. Nonperforming assets, including nonaccrual loans and repossessed real estate, totaled $1.21 billion, declining from $1.25 billion at the end of the first quarter and $1.23 billion a year earlier. The ratio of nonperforming assets to total assets was 2.17% as of June 30, down from 2.19% in March but up from 1.93% in June 2009.
Net charge-offs -- loan losses less recoveries -- for the second quarter totaled $146 million, declining from $173 million during the first quarter and $248 million a year earlier. Since the charge-offs exceeded the provision for loan losses, Comerica "released" $20 million in loan loss reserves during the quarter. Loans losses totaled $967 million, covering 2.38%, far exceeding the annualized ratio of net charge-offs to average loans, which was 1.44% for the second quarter. This indicates the reserve release is likely to accelerate over the next several quarters, boosting Comerica's earnings.
Improving credit metrics and reserve releases will be an ongoing theme assuming the economic recovery continues. Several of the largest industry players last week reported significant earnings improvements for the second quarter from reserve releases, including
, which added $3.6 billion to loan loss reserves while net loan charge-offs totaled $6.5 billion, releasing $2.6 billion in reserves and boosting operating earnings by that amount.
Bank of America
released $1.45 billion in loan loss reserves during the second quarter, and
released $2.8 billion in loan loss reserves.
Other positive indicators for Comerica's earnings included an improved net interest margin -- essentially a bank's average yield on loans and investments less the average cost of deposits and wholesale borrowings -- which was 3.28% for the second quarter, increasing from 3.18% the previous quarter and 2.73% a year earlier. Not only did the company continue to enjoy the cheap funding amid historically low short-term rates, its non-interest bearing deposits increased 21% over the previous year to $15.2 billion as of June 30. Combine this with a 12% reduction in the balance sheet over the same period and Comerica is well-positioned to fund expansion.
CEO Ralph Babb said Comerica's pipeline of new loan commitment is "now at its highest level in more than two years."
Shares closed at $36.81 Tuesday; they are up 25% year to date.
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.