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Comerica Inc. Reports Operating Results (10-Q)

October 29, 2010 | About:

10qk

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Comerica Inc. (CMA) filed Quarterly Report for the period ended 2010-09-30.

Comerica Inc. has a market cap of $6.48 billion; its shares were traded at around $35.7 with and P/S ratio of 2. The dividend yield of Comerica Inc. stocks is 0.5%.CMA is in the portfolios of Richard Pzena of Pzena Investment Management LLC, Pioneer Investments, Bruce Kovner of Caxton Associates, David Dreman of Dreman Value Management, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, RS Investment Management, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net income for the three months ended September 30, 2010 was $59 million, an increase of $40 million from $19 million reported for the three months ended September 30, 2009. The increase in net income in the third quarter 2010 compared to the same period in 2009, was primarily due to a $197 million decrease in the provision for credit losses ($189 million decrease in the provision for loan losses and a $8 million decrease in the provision for credit losses on lending-related commitments) and a $19 million increase in net interest income, partially offset by decreases of $107 million in net securities gains and $8 million in service charges on deposit accounts and an increase of $16 million in salaries expense. Net income attributable to common shares was $59 million for the third quarter 2010, compared to a net loss attributable to common shares of $16 million for the same period one year ago. There were no preferred stock dividends included in net income attributable to common shares for the three months ended September 30, 2010, compared to $34 million of preferred stock dividends included in the net loss attributable to common shares for the same period one year ago. Diluted net income per common share was $0.33 in the third quarter 2010, compared to a diluted net loss per common share of $0.10 for the same period one year ago.

Net income for the nine months ended 2010 was $181 million, an increase of $135 million from $46 million reported for the nine months ended September 30, 2009. The increase in net income for the nine months ended September 30, 2010 from the comparable 2009 period resulted primarily from a $399 million decrease in the provision for credit losses ($403 million decrease in the provision for loan losses, partially offset by a $4 million increase in the provision for credit losses on lending-related commitments), a $70 million increase in net interest income, a decrease of $28 million in FDIC insurance expense, and a $17 million after-tax gain recognized in income from discontinued operations in the first quarter 2010. These increases were partially offset by decreases of $230 million in net securities gains and $13 million in service charges on deposit accounts. The nine-month period ended September 30, 2009 included a reduction of accrued tax interest as a result of offsetting anticipated refunds against estimated amounts due to the Internal Revenue Service (IRS) and a $24 million non-taxable gain on the termination of certain leveraged leases which, in addition to the impact of the increase in pre-tax income, resulted in a $114 million increase in the provision for income taxes in the nine months ended September 30, 2010, compared to the comparable 2009 period. After preferred dividends of $123 million, net income attributable to common shares was $58 million for the first nine months of 2010, compared to a net loss attributable to common shares of $56 million, after preferred dividends of $101 million, in the same period one year ago. Diluted net income per common share, which included a $94 million charge related to the redemption of preferred stock, discussed in the Capital section of this financial review, was $0.34 for the first nine months of 2010, compared to a diluted net loss per common share of $0.37 for the comparable 2009 period.

· Average earning assets of approximately $48 billion in the fourth quarter 2010, largely reflecting a decline in average excess liquidity from $3.0 billion in the third quarter 2010 to approximately $1 billion in the fourth quarter 2010. Excess liquidity is expected to decline primarily due to debt maturities and the redemption of the trust preferred securities.

Net interest income was $404 million for the three months ended September 30, 2010, an increase of $19 million compared to $385 million for the same period in 2009. The increase in net interest income in the third quarter 2010, compared to the same period in 2009, resulted primarily from changes in the funding mix, including a continued shift in funding sources toward lower-cost funds, maturities of higher-cost medium and long-term debt and improved loan spreads. The Quarterly Analysis of Net Interest Income & Rate/Volume Fully Taxable Equivalent table of this financial review details the components of the change in net interest income on a fully taxable equivalent (FTE) basis for the three months ended September 30, 2010, compared to the same period in the prior year. On a FTE basis, net interest income increased $18 million to $405 million for the three months ended September 30, 2010, from $387 million for the comparable period in 2009. Average earning assets decreased $7.3 billion, or 13 percent, to $50.2 billion in the third quarter 2010, compared to $57.5 billion in the third quarter 2009, due to decreases of $4.7 billion, or 10 percent, in average loans, $2.2 billion, or 24 percent, in average investment securities available-for-sale, and $491 million, or 14 percent, in average interest-bearing deposits with banks. The net interest margin (FTE) for the three months ended September 30, 2010 increased 55 basis points to 3.23 percent, from 2.68 percent for the comparable period in 2009, primarily due to the reasons cited for the increase in net interest income discussed above. The net interest margin was reduced by approximately 19 basis points and 16 basis points in the third quarters of 2010 and 2009, respectively, from excess liquidity. Excess liquidity was represented by $3.0 billion and $3.5 billion of average balances deposited with the Federal Reserve Bank (FRB), included in interest-bearing deposits with banks in the consolidated balance sheets, in the third quarters of 2010 and 2009, respectively.

Net interest income was $1.2 billion for the nine months ended September 30, 2010, an increase of $70 million compared to the same period in 2009. The increase in net interest income in the nine months ended 2010, compared to the same period in 2009, was primarily due to the same reasons cited in the quarterly discussion above. The Year-to-date Analysis of Net Interest Income & Rate/Volume Fully Taxable Equivalent table provides an analysis of net interest income for the first nine months of 2010 on a FTE basis, compared to the same period in the prior year. On a FTE basis, net interest income for the nine months ended September 30, 2010 was $1.2 billion, an increase of $68 million compared the same period in 2009. Average earning assets decreased $7.9 billion, or 13 percent, to $51.6 billion for the nine months ended September 30, 2010, compared to the same period in the prior year, due to a $6.6 billion, or 14 percent, decrease in average loans, to $40.7 billion, and a $2.5 billion decrease in average investment securities available-for-sale, partially offset by an increase of $1.2 billion in average interest-bearing deposits with banks. The net interest margin (FTE) for the nine months ended September 30, 2010 increased 58 basis points to 3.23 percent, from 2.65 percent for the same period in 2009, primarily due to the same reasons cited in the quarterly discussion above. The impact of excess liquidity, as defined above, was a reduction of approximately 22 basis points and 10 basis points to the net interest margin (FTE) for the nine-month periods ended September 30, 2010 and 2009, respectively. Refer to the Supplemental Financial Data section of this financial review for reconcilements of non-GAAP financial measures.

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