Comerica Says Interest Rates, Oil Prices Boost Results

By Austen Hufford 

Comerica Inc. said increased interest rates and stabilizing oil prices would boost results this year.

The Dallas-based regional bank reported a fourth-quarter profit of $164 million, up from $116 million in the same period a year ago. On a per-share basis, earnings grew to 92 cents from 64 cents.

In all, revenue in the fourth quarter, a combination of net interest income and noninterest income, rose 3.3% to $722 million. Analysts polled by Thomson Reuters had anticipated 87 cents in per-share profit and $729.2 million in revenue.

In December, the Federal Reserve approved its second rate increase in a decade and signaled that interest rates would rise at a faster pace than previously projected.

The bank said the rate increase would boost revenue and that the rise in energy prices has assuaged concerns about the bank's energy loans.

When the recent slide in energy prices began, Comerica had a relatively high share of loans in the sector and took large provisions to cover loans potentially going bad. With oil prices up recently, the bank hasn't had to set aside as much. During the quarter, it set aside $35 million in its provision for losses, down from $60 million in the quarter last year but up from $16 million last quarter.

Comerica, which does a chunk of its business in Texas and lends to many companies in the energy sector, has continued to reduce its exposure to energy loans, which are now less than 5% of its total portfolio. The bank had $2.3 billion in energy business loans compared with $2.5 billion in the previous quarter.

Comerica had $582 million of nonaccrual loans in the fourth quarter, meaning there is uncertainty about whether they will be paid back on time, down from $631 million in nonaccrual loans in the previous quarter but up from $367 million in the previous year.

Net interest margin, an important measure of lending profitability largely tied to interest rates, was 2.65% in the December quarter, down from 2.66% in the third quarter but up from 2.58% a year prior.

Net interest income grew 5.5% from a year prior on higher yields on loans and Federal Reserve deposits.

Fee-based income increased 0.4% to $267 million in the quarter on an increase in card fees and asset management income.

Noninterest expenses fell 4.4% to $461 million on lower salaries.

Write to Austen Hufford at [e-mail]

(END) Dow Jones Newswires

January 17, 2017 07:46 ET (12:46 GMT)

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