Comerica reported a steep decline in first-quarter profits as weak energy prices forced the Dallas company to sharply boost its reserves for loan losses.
The $69 billion-asset Comerica said Tuesday that it earned $60 million in the first quarter, a decline of 55% from the same period last year. Earnings per share fell 53%, to 34 cents, or 8 cents below the average estimate of Wall Street analysts.
Though Comerica reported a healthy increase in net interest income, aided by rising interest rates, the gain was wiped out by credit costs. The company set aside $148 million for loan losses in the quarter, more than 10 times what it reserved in last year’s first quarter, as nonperforming loans increased nearly 147%, to $689 million.
Its total criticized energy loans swelled to $1.8 billion in the quarter, from $1.2 billion three months earlier.
"Our first quarter results were impacted by the current oil and gas cycle, as we significantly increased our reserve for loan losses," Ralph Babb, Comerica's chairman and chief executive, said in a news release.
With profits likely to remain under pressure for several more quarters, the company announced that it has hired the Boston Consulting Group to undertake "a comprehensive review of its expense and revenue base in order to meaningfully enhance profitability." Comerica plans to provide details on the progress of the initiative in next quarter's earnings report.