Comerica Incorporated Management Discusses Q1 2012 Results - Earnings Call Transcript

Comerica Incorporated (CMA)

Q1 2012 Earnings Call

April 17, 2012 8:00 am ET

Executives

Darlene P. Persons - Senior Vice President and Director of Investor Relations

Ralph W. Babb - Chairman, Chief Executive officer, President, Chairman of Capital Committee, Chairman of Special Preferred Stock Committee, Member of Management Policy Committee, Chief Executive officer of Comerica Bank, President of Comerica Bank and Chairman of Comerica Bank

Karen L. Parkhill - Vice Chairman and Chief Financial Officer

Lars C. Anderson - Vice Chairman, Member of Management Policy Committee and Vice Chairman of The Business Bank

John M. Killian - Executive Vice President of Credit Policy, Chief Credit officer, Executive Vice President, Member of Management Policy Committee, Chief Credit officer of Comerica Bank and Executive Vice President of Comerica Bank

Analysts

Conor Fitzgerald

Ken A. Zerbe - Morgan Stanley, Research Division

John G. Pancari - Evercore Partners Inc., Research Division

Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division

Jessica Ribner - FBR Capital Markets & Co., Research Division

Robert Placet - Deutsche Bank AG, Research Division

Craig Siegenthaler - Crédit Suisse AG, Research Division

Brian Foran - Nomura Securities Co. Ltd., Research Division

Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division

Terence J. McEvoy - Oppenheimer & Co. Inc., Research Division

Josh Levin - Citigroup Inc, Research Division

Justin C. Maurer - Lord, Abbett & Co. LLC

Matthew H. Burnell - Wells Fargo Securities, LLC, Research Division

Ryan M. Nash - Goldman Sachs Group Inc., Research Division

Brian Klock - Keefe, Bruyette, & Woods, Inc., Research Division

Michael Rose - Raymond James & Associates, Inc., Research Division

Christopher M. Mutascio - Stifel, Nicolaus & Co., Inc., Research Division

Unknown Analyst

Jeff K. Davis - Guggenheim Securities, LLC, Research Division

Stephen Scinicariello - UBS Investment Bank, Research Division

Jon G. Arfstrom - RBC Capital Markets, LLC, Research Division

Kevin B. Reynolds - Wunderlich Securities Inc., Research Division

Gary P. Tenner - D.A. Davidson & Co., Research Division

Presentation

Operator

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Comerica First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Darlene Persons, Director of Investor Relations. Ma'am, you may begin your conference.

Darlene P. Persons

Thank you, Regina. Good morning, and welcome to Comerica's First Quarter 2012 Earnings Conference Call. Participating on this call will be our Chairman, Ralph Babb; Vice Chairman and Chief Financial Officer; Karen Parkhill; Vice Chairman of the Business Bank, Lars Anderson; and Chief Credit Officer, John Killian. You’ll hear that Lars has a touch of laryngitis, but he is still ready to answer your questions.

A copy of our press release and presentation slides are available on the SEC's website, as well as in the Investor Relations section of our website, comerica.com. As we review our first quarter results, we will be referring to the slides which provide additional details on our earnings.

Before we get started, I would like to remind you that this conference call contains forward-looking statements, and in that regard, you should be mindful of the risks and uncertainties that can cause future results to vary from expectations. Forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward-looking statements. I refer you to the Safe Harbor statement contained in the release issued today, as well as Slide 2 of this presentation, which I incorporated into this call, as well as our filings with the SEC. Also, this conference call will reference non-GAAP measures. In that regard, I will direct you to the reconciliation of these measures within this presentation.

Now I'll turn the call over to Ralph, who will begin on Slide 3.

Ralph W. Babb

Good morning. Today, we reported first quarter 2012 earnings of $0.66 per share on net income of $130 million, a 36% increase from the fourth quarter of 2011.

Turning to Slide #4 and further highlights. Loans continued to grow in the first quarter, with average loans up $815 million or 2%, primarily reflecting an increase of $1.2 billion or 5% in commercial loans. The increase in commercial loans was broad-based across the majority of business lines and all major markets. As expected, commercial loan growth was partially offset by the continued decline in Commercial Real Estate loans.

Deposits also continued to grow. We had record deposits of $49.3 billion at March 31, 2012, and had an increase in average deposits of $532 million or 1%, primarily reflecting an increase of $461 million in noninterest-bearing deposits.

Net interest income, including accretion, was stable. Noninterest income increased $24 million, driven by a $10 million or 6% increase in customer-driven fees, offsetting the headwinds of regulatory reform.

We continued to have tight control of expenses. Noninterest expenses decreased $30 million in the first quarter to $448 million, primarily due to the decrease in restructuring expenses related to our acquisition of Sterling Bank shares.

Credit quality continued to improve in the first quarter. This was the 11th consecutive quarter of a decline in net charge-offs with a $15 million decrease. Net charge-offs are at the lowest level since the third quarter of 2007. The provision for loan losses was relatively stable. Our expectations is that we will continue to see the provision and net charge-offs at or near these levels for the remainder of the year, assuming the current pace of economic growth is sustained.

We continue to approach capital management from a position of strength. As we announced on March 14, 2012, the Federal Reserve did not object to our capital plan and the capital distributions contemplated in the plan. The capital plan, which was approved by our Board of Directors, provides up to $375 million in equity repurchases from the first quarter of 2012 through the first quarter of 2013. We repurchased $33 million or 1.1 million shares under the share repurchase program in the first quarter of 2012. Our capital plan further contemplates an increase in our quarterly dividend from $0.10 per share to $0.15 per share, a 50% increase. A dividend proposal will be considered by our board at our meeting on April 24, 2012.

Turning to Slide 5 and our key markets and customer sentiment. Our customers in Texas are feeling more optimistic, as evidenced by the 4% quarter-over-quarter average loan growth led by increases in Energy, Middle Market and Global Corporate Banking. We continued to leverage the synergies from our Sterling acquisition. Momentum in the Texas economy increased in early 2012 after cooling at the end of 2011. Labor market conditions improved, the energy sector remained active, and residential construction activity has increased. We expect to see ongoing gains in our Texas economic activity index throughout 2012, driven by continued strength in those 3 areas.

Read the rest of this transcript for free on seekingalpha.com