Free 7-day Trial
All Articles and Columns »

Comerica Inc. Reports Operating Results (10-Q)

July 30, 2012 | About:
insider

10qk

18 followers
Comerica Inc. (CMA) filed Quarterly Report for the period ended 2012-06-30.

Comerica Incorporated has a market cap of $6.06 billion; its shares were traded at around $30.47 with a P/E ratio of 11.7 and P/S ratio of 2.3. The dividend yield of Comerica Incorporated stocks is 2%.

Highlight of Business Operations:

Net interest income was $435 million for the three months ended June 30, 2012, an increase of $44 million compared to $391 million for the same period in 2011. The increase in net interest income in the second quarter 2012, compared to the same period in 2011, resulted primarily from a $6.5 billion increase in average earning assets, partially offset by a 4 basis point decrease in the net interest margin. The increase in net interest income in the second quarter 2012, compared to the same period in 2011, reflected the benefit from increases in average loans ($36 million) and investment securities ($15 million), accretion of the purchase discount on the acquired Sterling loan portfolio ($18 million) and lower deposit rates ($7 million), partially offset by decreased yields on loans ($16 million) and mortgage-backed investment securities ($15 million). 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 June 30, 2012, compared to the same period in the prior year. Average earning assets increased $6.5 billion, or 13 percent, to $56.7 billion for the second quarter 2012, compared to the second quarter 2011, in part due to the acquisition of Sterling and reflected increases of $4.1 billion in average loans and $2.3 billion in average investment securities available-for-sale. The net interest margin (FTE) for the three months ended June 30, 2012 decreased 4 basis points to 3.10 percent, from 3.14 percent for the comparable period in 2011, primarily from decreased yields on loans and mortgage-backed investment securities, partially offset by the benefit from accretion of the purchase discount on the Sterling acquired loan portfolio and lower deposit costs. The lower loan yields reflected a shift in the average loan portfolio mix, largely due to a decrease in average commercial real estate loans and an increase in lower yielding, higher credit quality average commercial loans. Accretion of the purchase discount on the acquired Sterling loan portfolio increased the net interest margin by 13 basis points in the second quarter 2012. At June 30, 2012, $60 million of purchase discounts remained on acquired loans not deemed credit impaired at acquisition.

Net interest income was $878 million for the six months ended June 30, 2012, an increase of $92 million compared to $786 million for the same period in 2011. The increase in net interest income in the six months ended June 30, 2012, compared to the same period in 2011, resulted primarily from a $6.7 billion increase in average earning assets and one more day in the six-month period ended June 30, 2012, partially offset by a 5 basis point decrease in the net interest margin. The increase in net interest income in the six months ended June 30, 2012, compared to the same period in 2011, reflected the benefit from increases in average loans ($58 million) and investment securities ($34 million), accretion of the purchase discount on the acquired Sterling loan portfolio ($43 million), lower deposit rates ($12 million) and one more day in the six months ended June 30, 2012 ($5 million), partially offset by decreased yields on loans ($27 million) and mortgage-backed investment securities ($27 million). The "Year-to-Date 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 six months ended June 30, 2012, compared to the same period in the prior year. Average earning assets increased $6.7 billion, or 13 percent, to $56.4 billion for

The U.S. economy grew at a slow-to-moderate pace through the first half of 2012, showing signs of further slowing through the second quarter. Real gross domestic product (GDP) for the first quarter of 2012 grew at a 1.9 percent annualized rate and is expected to grow at a rate of about 1.7 percent for the second quarter of 2012. The unemployment rate increased slightly from 8.1 percent in April 2012 to 8.2 percent in May 2012, and remained at that level in June 2012. Payroll job growth slowed noticeably in March 2012 to 143,000, after averaging 252,000 new jobs per month from December 2011 through February 2012. Recent payroll job growth data was well below the rate needed for a self-sustaining expansion. The ISM Manufacturing and Non-Manufacturing Indexes both decreased slightly in June 2012. The ISM Manufacturing Index fell below 50 in June 2012, indicating a contracting manufacturing sector for the first time since July 2009. The ISM Non-Manufacturing Index declined but remained in positive territory, indicating ongoing expansion, but at a slower rate, for that broad sector of the economy. Automobile sales flattened in the first half of 2012 after growing through 2011. Inflation indicators moderated through the second quarter of 2012 as energy prices fell. Upward pressure on prices is still seen in apartment rental rates and most recently in food prices, due to the expected poor corn harvest. Real GDP is expected to grow at near 2 percent for the second half of 2012. Recession in the Eurozone and slower economic growth in Asia are key risk factors for the U.S. economy for the remainder of the year. Sizeable tax increases and cuts to federal spending, together known as the "Fiscal Cliff," are significant economic risk factors for the first half of 2013. Momentum in the Texas economy remained strong through the first half of 2012. Labor market conditions continued to improve, the energy sector was very active, and residential construction activity increased. A key risk to the Texas economy for the second half of 2012 is lower energy prices. The economy of California remains hindered by a depressed housing market and challenging fiscal conditions. Some parts of the California economy are strong, notably the high tech industries of Silicon Valley. Michigan's economy is being buoyed by a rebounding U.S. automotive industry, however, there is downside risk to Michigan if auto demand eases.

Noninterest expenses were $882 million for the first six months of 2012, an increase of $53 million compared to $829 million for the comparable period in 2011. Salaries expense increased $17 million and employee benefits expense increased $21 million, primarily for the same reasons cited in the quarterly discussion above. FDIC insurance expense decreased $7 million in the first six months of 2012, compared to the same period in 2011, primarily due to the implementation of changes to the deposit insurance assessment system in the second quarter 2011. Other real estate expense decreased $10 million in the first six months of 2012, compared to the same period in the prior year, primarily reflecting decreased write-downs and losses on sales of foreclosed property. Other noninterest expenses increased $21 million in the first six months of 2012, compared to the same period in the prior year, primarily due to a $17 million increase in litigation-related expenses resulting primarily from the same reasons cited in the quarterly discussion above. Included in noninterest expenses for the six-month periods ended June 30, 2012 and 2011 were merger and restructuring charges of $8 million and $5 million, respectively. Under the restructuring plan, approximately $30 million of expenses remain, substantially all of which is expected to be incurred in the third quarter 2012.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 3.5/5 (4 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Hide