Comerica (CMA) Q1 Earnings & Revenues Miss, Fee Revenue Falls
Comedica Inc. CMA delivered a surprise Q1 2022 result of -0.72%. Earnings per share of $1.37 missed the Zacks consensus estimate of $1.38. In addition, the net result is lower than the figure for the quarter of the previous year by $2.43.
CMA’s results were impacted by lower revenue due to lower commission income. Higher spending and a decline in deposit balances were further negatives. Nonetheless, decent net interest income (“NII”) and credit quality have been tailwinds.
Net income applicable to common shares was $182 million in the quarter, plunging 47% year-over-year from $343 million.
By segment, on an annual basis, net profit fell 45.6% and 51.4% at Commercial Bank and Wealth Management, respectively. The Retail segment recorded a net loss compared to a net profit of $6 million in the prior year quarter. The Finance segment recorded a loss of $34 compared to $80 for the loss reported a year ago.
Falling income, rising expenses
Comerica’s total revenue in the first quarter was $700 million, down 1.8% year-over-year. Additionally, revenue was below the consensus estimate of $721.5 million.
NII increased 3% year-over-year to $456 million in the quarter due to higher interest-earning assets. The NIM contracted 10 basis points to 2.19%.
Total non-interest revenue was $244 million, down 10% year over year. Lower card fees, derivative income, letter of credit fees and other non-interest income mainly weighed on commission income.
Non-interest expense totaled $473 million, up 6% year over year. The increase is mainly explained by the increase in salaries and social charges, advertising expenses and other non-interest expenses.
The efficiency ratio was 66.91% compared to 62.59% in the prior year quarter. A rise in the ratio indicates lower profitability.
Decent balance sheet position
As of March 31, 2022, total assets and common shareholders’ equity were $89.2 billion and $7 billion, respectively, compared to $86.3 billion and $8.2 billion each as of March 31, 2022. March 2021.
Total loans increased slightly on a sequential basis to $49.6 billion. However, total deposits fell 5.8% from the previous quarter’s level to $77.6 billion.
Decent credit quality
Total non-performing assets decreased 15.7% year-over-year to $274 million. Provision for credit losses was $599 million, compared with $807 million in the year-ago quarter. The ratio of loan loss provision to total loans was 1.21% at March 31, 2022, compared to 1.59% at March 31, 2021.
However, net credit-related charges were $8 million, compared to $3 million in the prior year quarter. A provision for credit losses profit of $11 million was recorded in the reported quarter, down sharply from the $182 million profit recorded in the prior year quarter.
Low capital position
As of March 31, 2022, CMA’s tangible common equity ratio was 6.77%, compared to 8.30% in the prior year quarter. The total capital ratio was 12.04%, down from 13.86% in the year-ago quarter.
The Common Equity Tier 1 (CET1) ratio was 9.93%, compared to 11.02% in the prior year quarter.
Strong capital deployment activities
During the quarter under review, Comerica returned $124 million to its shareholders through share buybacks and dividends. CMA repurchased $29 million of common stock under its stock buyback program and declared dividends of $89 million on its common stock and $6 million on its preferred stock.
Our point of view
Comerica gave a weak performance in the first quarter. Limited revenue expansion, eroded by lower margin and fee income, and a high expense base, is of concern. Nevertheless, a higher NII and decent credit quality played a favorable role. A decent balance sheet position should continue to support its finances.
Comerica Inc. Price, Consensus and EPS Surprise
Comerica Incorporated price-consensus-eps-surprise-chart | Quote from Comerica Incorporated
Currently, Comerica carries a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other banks
PNC Financial Services Group, Inc. PNC delivered an 18.4% earnings surprise in the first quarter of 2022 on the back of a substantial recovery of credit losses. Earnings per share of $3.29, on an adjusted basis (excluding pretax integration costs related to the acquisition of BBVA USA), beat Zacks’ consensus estimate of $2.78. However, net income was down 20% year over year.
The rise in the NII, driven by interest-earning assets and loan growth, was a tailwind for PNC Financial. However, higher expenses and lower deposits weighed on results.
American bank USB reported earnings per share of 99 cents in the first quarter of 2022, beating Zacks’ consensus estimate of 93 cents. However, the results do not compare favorably to the $1.45 figure in the prior year quarter.
US Bancorp’s results were supported by higher revenue, loan growth and lower non-performing assets. USB’s capital position was decent during the quarter. However, higher expenses and a high provision for credit losses were offsetting factors.
Bank of the First RepublicFRC’s first-quarter 2022 earnings per share of $2 beat Zacks’ consensus estimate of $1.90. In addition, net income improved by 11.7% compared to the prior year quarter.
FRC’s results were supported by an increase in NII and non-interest income. The company’s capital position was strong during the quarter. Higher expenses and a high provision for credit losses were the offsetting factors.
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