Comerica in Dallas posted lower-than-expected earnings that reflected heightened stress in its energy loan book.
The $70 billion-asset company reported Friday that its second-quarter net income fell nearly 11% from a year earlier, to $135 million, or 73 cents a share. The results missed the average estimate of analysts polled by Bloomberg by 2 cents.
Comerica said that it downgraded $329 million of energy loans to "criticized" status during the quarter. The total number of criticized energy credits was $578 million at June 30, or roughly 17% of all the loans in that portfolio. About 6% of Comerica's energy book was considered criticized at March 31.
Comerica's energy loan portfolio shrank by 8% from March 31, to $3.4 billion. The company also said that net chargeoffs increased by $2 million in Texas during the quarter, adding that energy concerns contributed heavily to a loan-loss provision that more than quadrupled from a year earlier, to $47 million.
"Our energy customers are generally decreasing their loan commitments and outstandings as they take the necessary actions to adjust to lower energy prices, such as reducing their expenses, disposing of assets, and tapping the capital markets," Ralph Babb, Comerica's chief executive, said in the release. "On average, loan to values remained stable from the last redetermination."
Still, net interest income rose 1.2% from a year earlier, to $421 million. Total loans rose 4%, to $49.7 billion, despite the pull back from energy clients. The net interest margin narrowed by 13 basis points, to 2.65%.
Noninterest income increased by 1% to $261 million, largely because of a spike in income from merchant payment processing services and interchange fees.
Noninterest expenses rose 8%, to $436 million, led by higher processing fees and salaries.