Comerica reported a fourth-quarter profit increase of 42% over the same period in 2015, to $163 million, as aggressive expense cuts, improved credit quality and the benefits of a late-year rate hike more than compensated for flat loan growth.
Earnings per share increased 44% year over year, to 92 cents, besting consensus estimates of Wall Street analysts by a nickel.
The $73 billion-asset company, based in Dallas, said Tuesday that loans at the end of 2016 totaled $49.1 billion, basically unchanged from the end of 2015. Net interest income increased 5%, however, thanks largely to Federal Open Market Committee's decision to raise interest rates by 25 basis points in mid-December. Roughly 90% of Comerica's loans are floating rate and therefore reprice quickly when rates increase, company officials said on a conference call Tuesday.
Earnings were also aided by a 42% decline in its provision for loan losses, to $35 million, as Comerica continued to shrink its portfolio of loans tied to the energy sector.
Expense cuts, too, drove overall results as Comerica shuttered 14 more offices in the quarter and continued to reduce headcount. In 2016, the bank eliminated roughly 700 positions – including more than 200 managerial jobs – and closed 19 offices as part of broader attempt to reduce expenses by $150 million a year and drive its efficiency ratio below 60%. Its efficiency ratio at Dec. 31 was 63.58%, compared to 68.92% a year earlier. Company officials said Tuesday that they expect the efficiency ratio to fall below 60% sometime in 2018.
"We have made significant progress in executing on our expense savings and are fully committed to delivering on the efficiency and revenue opportunities to further enhance profitability," Chairman and CEO Ralph W. Babb Jr. said in a news release.
Comerica's shares were down 4.4% in early trading Tuesday, to $66.83.