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Comerica (CMA) Q4 Earnings Beat Estimates, Revenues Fall

Comerica CMA delivered a fourth-quarter 2021 positive earnings surprise of 3.11%. Earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.61. However, bottom line came in lower than the prior-year quarter figure of $3.43.

CMA’s results were supported by lower provisions and a robust fee income. Nevertheless, lower revenues due to reduction in net interest income (NII) were recorded. Moreover, higher expenses and a decline in loan balance were major drags.

Net income came in at $221 million in the quarter, up 2.8% year over year from $215 million.

In 2021, net income totaled $1.14 billion or $8.35 per share, up from the prior year’s $482 million or $3.43 per share. Full-year earnings outpaced the Zacks Consensus Estimate of $8.28.

Segment-wise, on a year-over-year basis, net income decreased 7% at Commercial Bank. Wealth Management and Retail segments reported a substantial year-over-year jump in net income. The Finance segment reported a loss, down 14% from the year-ago reported loss.

Revenues Fall on Lower NII, Expenses Increase

Comerica’s fourth-quarter net revenues were $750 million, down 74% year over year. Nonetheless, the top line beat the consensus estimate of $735.4 million.

NII decreased 1.7% on a year-over-year basis to $461 million in the quarter on lower rates. The NIM contracted 32 basis points to 2.04%.

Total non-interest income was $289 million, up 9.1% on a year-over-year basis. Higher fiduciary income, service charges on deposit accounts, commercial lending fees, derivative income and other noninterest income mainly supported the fee income.

Non-interest expenses totaled $486 million, up 4.5% year over year. The upswing resulted chiefly from higher salaries and benefit expenses, outside processing fees and occupancy expenses.

The efficiency ratio was 64.61% compared with the prior-year quarter’s 63.26%. A rise in the ratio indicates lower profitability.

Decent Balance-Sheet Position

As of Dec 31, 2021, total assets and common shareholders' equity were $96.69 billion and $7.8 billion, respectively, compared with $85.3 billion and $7.9 billion each as of Dec 31, 2020.

Total loans declined marginally on a sequential basis to $47.83 billion.

Nonetheless, total deposits increased 6.9% from the prior quarter’s level to $84.5 billion.

Strong Credit Quality

Total non-performing assets decreased 25.1% year over year to $269 million. The allowance for credit losses was $618 million, down from $992 million in the prior-year quarter. The allowance for loan losses to total loans ratio was 1.26% as of Dec 31, 2021, down from 1.9% as of Dec 31, 2020.

Net credit-related recoveries were $4 million compared with net credit-related charge-offs of $29 million in the prior-year quarter. A benefit to provision for credit losses of $25 million was recorded in the reported quarter compared with $17 million in the prior-year quarter.

Weak Capital Position

As of Dec 31, 2021, CMA's tangible common equity ratio was 7.30%, down from 8.02% in the prior-year quarter. The total capital ratio was 12.37%, declining from 13.20% in the year-ago quarter.

Common Equity Tier 1 (CET1) capital ratio was 10.15%, falling from 10.34% in the prior-year quarter.

Solid Capital-Deployment Activities

In the reported quarter, Comerica returned $139 million to its shareholders through share repurchases and dividends. CMA repurchased $50 million of common stock under its share repurchase program and declared dividends of $89 million on its common stock.

Our Viewpoint

Comerica's prospects look promising as strategic initiatives are likely to boost its performance. Also, lower provisions and a strong credit quality acted as tailwinds. Nevertheless, a restricted top-line expansion, eroded by a lower margin and NII, and an elevated expense base are concerns.

Comerica Incorporated Price, Consensus and EPS Surprise

Comerica Incorporated Price, Consensus and EPS Surprise
Comerica Incorporated Price, Consensus and EPS Surprise

Comerica Incorporated price-consensus-eps-surprise-chart | Comerica Incorporated Quote

Currently, Comerica carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Bank of New York Mellon Corporation’s BK fourth-quarter 2021 adjusted earnings of $1.04 per share surpassed the Zacks Consensus Estimate of $1.02. The bottom line improves 8.3% from the prior-year quarter’s level.

For 2021, BK’s earnings per share (GAAP basis) of $4.14 increased 8% from the 2020 figure. The Zacks Consensus Estimate for earnings was $4.17 per share. Net income applicable to common shareholders was $3.55 billion, up 4% year over year.

First Republic Bank’s FRC fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by an increase in net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup C delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s tally.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

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