Comerica Q2 Earnings Beat on High Loan Demand, Stock Falls

Comerica Incorporated CMA reported second-quarter 2024 adjusted earnings per share of $1.53, beating the Zacks Consensus Estimate of $1.19. However, the bottom line plunged 25.4% from the prior-year quarter.

Results benefited from increased loan demand and a strong capital position. Nil provisions recorded in the quarter were another supporting factor. However, a decline in net interest and fee income, along with increased expenses, was a major headwind. Probably due to these negative aspects, shares of the company lost more than 12% following the earnings release.

Net income attributable to common shareholders was $200 million, down 24.8% from the year-ago quarter.

Revenues Decline, Expenses Rise

Total quarterly revenues were $824 million, down 10.8% year over year. However, the top line surpassed the consensus estimate of $812.8 million.

Quarterly net interest income (NII) fell 14.2% on a year-over-year basis to $533 million. The net interest margin contracted 9 basis points year over year to 2.86%.

Total non-interest income was $291 million, down 4% on a year-over-year basis. The decrease was primarily due to a decline in card fees, fiduciary income, and other non-interest income.

Non-interest expenses totaled $555 million, up 3.7% year over year. An increase in salaries and benefits expenses, as well as FDIC insurance expenses, majorly led to the rise.

The efficiency ratio was 67.77% compared with the prior-year quarter's 57.50%. A rise in this ratio indicates lower profitability.

As of Jun 30, 2024, Total loans increased 2% on a sequential basis to $51.9 billion. However, total deposits decreased 1.8% from the previous quarter to $62.5 billion.

Credit Quality: Mixed Bag

The company did not record any provision for credit loss in the reported quarter compared with the year-ago quarter's provision for credit loss of $33 million.

The allowance for credit losses was $717 million, down 1.5% from the year-ago quarter.

Total non-performing assets increased 21.5% year over to $226 million.

Further, the allowance for credit losses to total loans ratio was 1.38% as of Jun 30, 2024, up from 1.31% as of Jun 30, 2023. Also, the company recorded net charge-offs of $11 million for the quarter under review.

Capital Position Improves

Total capital ratio was 14.02%, up from 12.79% reported in the year-ago quarter. The Common Equity Tier 1 capital ratio was 11.55%, up from 10.31% in the prior-year quarter.

Further, as of Jun 30, 2024, CMA's tangible common equity ratio was 6.49%, up from 5.06% in the prior-year quarter.

Our Viewpoint

The company's solid capital position will aid capital distribution activities in the upcoming period, boosting investors' confidence in the stock. Also, an increase in loan balance and nil provisions is likely to support its financials. However, steadily mounting operating expenses and lower revenues remain a major concern.

Currently, Comerica carries a Zacks Rank #5 (Strong Sell).

Performance of Other Finance Stocks

First Horizon Corporation's FHN adjusted earnings per share (excluding notable items) of 36 cents missed the Zacks Consensus Estimate by a penny. Moreover, the figure declined 7.7% year over year.

FHN's results were adversely impacted by a fall in NII and non-interest income. Also, lower deposits and higher provisions were other negatives. Nonetheless, lower expenses and an increase in loan balances offered some relief.

F.N.B. Corporation's FNB adjusted earnings per share of 34 cents lagged the Zacks Consensus Estimate by a penny. Moreover, the bottom line declined 12.8% from the prior-year quarter.

FNB's results were primarily affected by higher provisions, higher expenses and lower NII. Nonetheless, a higher non-interest income and a rise in average loans and deposit balances offered some support.

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