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Comerica Inc. Reports Operating Results (10-Q)

October 30, 2012 | About:
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10qk

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Comerica Inc. (CMA) filed Quarterly Report for the period ended 2012-09-30.

Comerica Inc has a market cap of $5.65 billion; its shares were traded at around $29.22 with a P/E ratio of 10.8 and P/S ratio of 2.2. The dividend yield of Comerica Inc stocks is 2.1%.

Highlight of Business Operations:

Net interest income was $427 million for the three months ended September 30, 2012, an increase of $4 million compared to $423 million for the same period in 2011. The increase in net interest income in the third quarter 2012, compared to the same period in 2011, resulted primarily from a $4.6 billion increase in average earning assets, partially offset by a 22 basis point decrease in the net interest margin. Average earning assets increased $4.6 billion, or 9 percent, to $57.8 billion for the third quarter 2012, compared to the third quarter 2011, in part due to the acquisition of Sterling on July 28, 2011 and primarily reflecting increases of $3.5 billion in average loans and $1.6 billion in average investment securities available-for-sale, partially offset by a decrease of $575 million in interest-bearing deposits with banks. The net interest margin (FTE) for the three months ended September 30, 2012 decreased 22 basis points to 2.96 percent, from 3.18 percent for the comparable period in 2011, primarily from decreased yields on loans and mortgage-backed investment securities and a decrease in accretion of the purchase discount on the Sterling acquired loan portfolio, partially offset by lower deposit costs. The lower loan yields reflected a shift in the average loan portfolio mix, largely due to an increase in lower-yielding average commercial loans, the maturity of higher-yielding fixed-rate loans and positive credit quality migration throughout the portfolio. Accretion of the purchase discount on the acquired Sterling loan portfolio increased the net interest margin by 10 basis points and 20 basis points in the third quarter 2012 and 2011, respectively. At September 30, 2012, $49 million of purchase discounts remained on acquired loans not deemed credit impaired at acquisition. The increase in net interest income in the third quarter 2012, compared to the same period in 2011, reflected the benefit from volume increases in average loans ($27 million) and investment securities ($10 million) and lower deposit rates ($7 million), partially offset by decreased yields on loans ($20 million) and mortgage-backed investment securities ($7 million) and a decrease in accretion of the purchase discount on the acquired Sterling loan portfolio ($12 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 September 30, 2012, compared to the same period in the prior year.

Net interest income was $1.3 billion for the nine months ended September 30, 2012, an increase of $95 million compared to $1.2 billion for the same period in 2011. The increase in net interest income in the nine months ended September 30, 2012, compared to the same period in 2011, resulted primarily from a $6.0 billion increase in average earning assets, partially offset by an 11 basis point decrease in the net interest margin. Average earning assets increased $6.0 billion, or 12 percent, to $56.9 billion for the nine months ended September 30, 2012, compared to the same period in the prior year, primarily due to the acquisition of Sterling on July 28, 2011 and reflecting increases of $3.4 billion in average loans, $2.2 billion in average investment securities available-for-sale and $352 million in average interest-bearing deposits with banks. The net interest margin (FTE) for the nine months ended September 30, 2012 decreased 11 basis points to 3.08 percent, from 3.19 percent for the comparable period in 2011, primarily from decreased yields on loans and mortgage-backed investment securities, partially offset by an increase in accretion

and restructuring charges related to the acquisition of Sterling decreased $8 million for the three months ended September 30, 2012, compared to the same period in the prior year. Other noninterest expenses decreased $11 million in the three months ended September 30, 2012, compared to the same period in the prior year, primarily due to a $4 million decrease in litigation-related expenses, resulting primarily from developments on certain litigation claims during the three months ended September 30, 2011, and a $6 million increase in net gains recognized on sales of assets.

Noninterest expenses were $1.3 billion for the first nine months of 2012, an increase of $38 million compared to $1.3 billion for the comparable period in 2011. Salaries expense increased $17 million, primarily due to the impact of Sterling and the impact of annual merit increases. Employee benefits expense increased $28 million, primarily reflecting increased pension expense and the impact of Sterling. Other real estate expense decreased $13 million in the first nine 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 $10 million in the first nine months of 2012, compared to the same period in the prior year, primarily due to a $14 million increase in litigation-related expenses, resulting primarily from developments in certain litigation claims in the first nine months of 2012, and a $5 million increase in amortization of the core deposit intangible due to the acquisition of Sterling, partially offset by an $8 million increase in net gains recognized on sales of assets.

The net loss in the Finance Division was $291 million for the nine months ended September 30, 2012, compared to a net loss of $253 million for the nine months ended September 30, 2011. Net interest expense (FTE) of $499 million increased $47 million in the nine months ended September 30, 2012, compared to the same period in the prior year, primarily as a result of the Corporation's internal FTP methodology as described on page F-13 of the Corporation's 2011 Annual Report. The Finance Division pays the three major business segments for the long-term value of deposits based on their assumed lives. The three major business segments pay the Finance Division for funding based on the pricing and term characteristics of their loans. The increase in net interest expense (FTE) was primarily due to an increase in average deposits in the three major business segments and a decrease in average loans in Wealth Management. Noninterest income of $44 million decreased $13 million, primarily due to gains from sales of Sterling legacy securities recognized in 2011. Noninterest expenses of $8 million were unchanged from the comparable period in the prior year. The benefit for income taxes (FTE) of $172 million for the nine months ended September 30, 2012 increased $22 million, compared to the same period in the prior year, primarily resulting from an increase in losses before income taxes.

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