Comerica Misses, but Loans Grow

  • Third-quarter EPS of 61 cents, missing consensus estimate of 65 cents.
  • Average commercial & industrial loans grow 3% sequentially.
  • Net interest margin continues to narrow, in line with industry.

NEW YORK ( TheStreet) -- Comerica ( CMA) on Wednesday reported third-quarter net income attributable to common shares of $116 million, or 61 cents, missing the consensus estimate of a 65-cent profit, among analysts polled by Thomson Reuters.

The Dallas lender's earnings declined from $142 million, or 73 cents a share, during the second quarter, with the sequential earnings decline reflecting a $14 million decline in noninterest income "primarily due to decreases in certain non-customer driven income categories," as "net securities gains of $6 million and a $5 million annual incentive bonus received in the second quarter 2012 were not repeated in the third quarter, and net income from principal investing and warrants declined $3 million."

The sequential earnings decline also reflected a $16 million increase in noninterest expenses, to $449 million in the third quarter, mainly from expenses related to the company's acquisition of Sterling Bancshares in July 2011.

Comerica's third-quarter earnings to common shareholders were up 19% from $98 million, or 51 cents a share, in the third quarter of 2011.

Third-quarter net interest income declined to $427 million, from $435 million in the second quarter, although it increased from $423 million in the third quarter of 2011. The net interest margin -- the difference between the average yield on loans and investments and the average cost for deposits and borrowings -- narrowed to 2.96% in the third quarter, from 3.10% the previous quarter, and 3.18% a year earlier.

Most banks are facing pressure on their net interest margins, with the Federal Reserve keeping its target federal funds rate in a range of zero to 0.25% since the end of 2008, while the central bank in September significantly increased its purchases of long-term mortgage-backed securities, in an effort to keep long-term rates at historically low levels.

A bright spot for Comerica -- and another industry trend -- is the continued increase in noninterest bearing deposits, which totaled $21.8 billion as of Sept. 30, increasing 2% from the previous quarter, and 14% year-over-year.

Average loans grew 1% during the second quarter, with average commercial and industrial loans growing 3% sequentially to $26.7 billion, while average commercial mortgage loans declined by 3% to $9.7 billion.

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