Wider margin, cost cuts make up for weak loan growth at Comerica
Comerica in Dallas reported a double-digit increase in profits, as the benefit of recent interest rate hikes and ongoing expense cuts outweighed weakness in the company’s loan book.
The Dallas company's first-quarter earnings rose 39% from a year earlier to $281 million. Earnings per share were $1.59, or nine cents higher than the mean estimate of analysts tracked by FactSet Research Systems.
“Our relationship-banking strategy ... is helping us prudently manage loan and deposit pricing as interest rates have increased, as well as maintain strong credit metrics,” Ralph Babb, the $72.3 billion-asset company's chairman and CEO, said in a press release Tuesday. Babb predicted that loan growth will increase in the second quarter, and he said that efforts to improve efficiency will continue.
“We remain well positioned to benefit from additional rate increases, favorable changes in regulation and economic growth,” Babb said in the release.
The net interest margin, which widened 56 basis points to 3.41%, gave profits a big boost. Net interest income rose 17% to $549 million.
Lending, however, was a weak point. Total loans dipped slightly from the prior quarter, and rose just 1% from a year earlier, to $48.4 billion, on gradual upticks in commercial and residential mortgage loans.
Noninterest income dipped 1%, to $244 million on lower card and commercial lending fees.
Noninterest expenses declined 2% to $446 million thanks in part to lower outside processing fees.
The efficiency ratio — a highly watched metric in Comerica’s recent turnaround — fell to 56.33% from 61.71%.