DETROIT, July 20 /PRNewswire-FirstCall/ -- Comerica Incorporated (NYSE: CMA) today reported second quarter 2005 earnings of $217 million, or $1.28 per diluted share, compared to $199 million, or $1.16 per diluted share, for the first quarter 2005 and $192 million, or $1.10 per diluted share, for the second quarter 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010807/CMALOGO ) (dollar amounts in millions) 2nd Qtr '05 1st Qtr '05 2nd Qtr '04 Diluted EPS $1.28 $1.16 $1.10 Net Interest Income $483 $460 $448 Net Interest Margin 4.09% 4.00% 3.77% Provision for Loan Losses $2 $1 $20 Noninterest Income $219 $210 $228 Noninterest Expenses $383 $374 $372 Net Income $217 $199 $192 Return on Equity 16.99% 15.73% 15.35%
"Comerica's second quarter financial results reflect the continuation of positive trends that are evident across our markets and lines of business," said Ralph W. Babb Jr., chairman and chief executive officer. "For the third consecutive quarter, we reported solid loan growth, with an increase in average loans of $1.1 billion, or 10 percent on an annualized basis, compared to the first quarter 2005. Our second quarter results also include increases in both net interest income and non-interest income, while expenses and credit costs remain well controlled."
Net Interest Income
Net interest income was $483 million for the second quarter 2005, compared to $460 million for the first quarter 2005 and $448 million for the second quarter 2004. The $23 million increase in net interest income from the first quarter 2005 resulted from an increase in average earning assets, the spread improvement provided by non-interest bearing deposits in a rising interest rate environment, and the impact of one more day in the second quarter 2005. Average earning assets of $47.4 billion for the second quarter 2005 increased $767 million from the first quarter 2005, primarily as a result of a $1.1 billion, or three percent, increase in average loans to $43.2 billion for the second quarter 2005. Average deposits of $40.0 billion for the second quarter 2005 increased $218 million, less than one percent, from the first quarter 2005. Average short-term borrowings increased $741 million in the second quarter 2005, when compared to the prior quarter.
The net interest margin increased nine basis points from the first quarter 2005 to 4.09 percent in the second quarter 2005, due primarily to a greater contribution from noninterest-bearing deposits in a higher rate environment.
Noninterest Income
Noninterest income was $219 million for the second quarter 2005, compared to $210 million for the first quarter 2005 and $228 million for the second quarter 2004. Included in other noninterest income in the second quarter 2005 were write-downs (net of income distributions) recognized on unconsolidated venture capital and private equity investments of $5 million, compared to income distributions (net of write-downs) of $1 million in the first quarter 2005. Also included in other noninterest income in the second quarter 2005 were risk management hedge ineffectiveness gains of $5 million, compared to $5 million of losses in the first quarter 2005.
Noninterest Expenses
Noninterest expenses were $383 million for the second quarter 2005, compared to $374 million for the first quarter 2005 and $372 million for the second quarter 2004. Salaries expense increased $8 million in the second quarter 2005 compared to the first quarter 2005, primarily due to an increase in stock-based compensation and annual merit increases.
Credit Quality
(dollar amounts in millions) 2nd Qtr '05 1st Qtr '05 2nd Qtr '04
Net Charge-offs $29 $38 $56
Net Charge-offs/Average Total
Loans 0.27% 0.36% 0.55%
Provision for Loan Losses $2 $1 $20
Nonperforming Assets (NPAs) $246 $311 $430
NPAs/Total Loans, Other
Real Estate & Nonaccrual
Debt Securities 0.57% 0.75% 1.07%
Allowance for Loan Losses $609 $636 $762
Allowance for Loan Losses/
Total Loans 1.41% 1.52% 1.90%
Allowance for Credit Losses on
Lending-related Commitments* $15 $18 $28
* Included in "Accrued expenses and other liabilities" on the consolidated balance sheets.
During the second quarter of 2005, $47 million of loans greater than $2 million were transferred to nonaccrual status, a decrease of $19 million from the first quarter of 2005. Nonperforming assets were $246 million at June 30, 2005, a decrease of $65 million from March 31, 2005.
"We were pleased by the continued improvements in credit quality metrics in the second quarter 2005, which resulted in a $27 million decline in the allowance for loan losses from the first quarter," said Babb. "Nonperforming assets were at the lowest level in more than five years, and net charge-offs of $29 million were at the lowest level since the third quarter of 1999."
Balance Sheet and Capital Management
Total assets and common shareholders' equity were $54.7 billion and $5.1 billion, respectively, at June 30, 2005, compared to $53.5 billion and $5.0 billion, respectively, at March 31, 2005. There were approximately 167 million shares outstanding at June 30, 2005, compared to approximately 169 million shares outstanding at March 31, 2005. In the second quarter of 2005, approximately 2.0 million shares were repurchased in the open market for $114 million. Comerica's second quarter 2005 estimated tier 1 common, tier 1 and total risk-based capital ratios were 7.90 percent, 8.52 percent and 12.09 percent, respectively.
Business Segments
Comerica's operations are strategically aligned into three major business segments: the Business Bank, Small Business & Personal Financial Services, and Wealth & Institutional Management. The Finance Division also is included as a segment. The financial results below are based on the internal business unit structure of the Corporation and are presented on a fully taxable equivalent (FTE) basis.
The following table presents net income (loss) by business segment.
(dollar amounts in millions) 2nd Qtr '05 1st Qtr '05 2nd Qtr '04
Business Bank $163 71% $175 72% $188 74%
Small Business & Personal
Financial Services 49 21 44 18 46 18
Wealth & Institutional Management 17 8 25 10 19 8
229 100% 244 100% 253 100%
Finance (18) (30) (42)
Other* 6 (15) (19)
Total $217 $199 $192
* Includes items not directly associated with the major business segments or the Finance Division
Net income for the Business Bank was $163 million for the second quarter 2005, compared to $175 million for the first quarter 2005. Net interest income (FTE) of $350 million in the second quarter 2005 increased $13 million from the first quarter 2005. The provision for loan losses increased $14 million compared to the first quarter 2005 as the pace of credit quality improvement has slowed in the Midwest. Average loans of $34.1 billion in the second quarter 2005 increased $1.1 billion, or 14 percent on an annualized basis, compared to the first quarter 2005, primarily due to increases in Middle Market, Commercial Real Estate, National Dealer Services, and Global Corporate Banking loans. Average deposits of $20.4 billion in the second quarter 2005 increased $475 million, or 10 percent on an annualized basis, with the increase more than explained by higher deposits in the Financial Services Group.
Net income for Small Business & Personal Financial Services was $49 million for the second quarter 2005, compared to $44 million for the first quarter 2005. Net interest income (FTE) of $152 million in the second quarter 2005 increased $6 million from the first quarter 2005. Second quarter 2005 average loans of $5.8 billion were flat compared to first quarter 2005. Average deposits were $16.9 billion in the second quarter 2005, compared to $16.8 billion in the first quarter 2005, as increases in transaction and time deposit accounts were largely offset by decreases in money market deposit accounts.
Net income for Wealth & Institutional Management was $17 million for the second quarter 2005, compared to $25 million for the first quarter 2005. Net interest income (FTE) of $37 million in the second quarter 2005 increased $1 million from the first quarter 2005. Average loans were $3.3 billion in the second quarter 2005, compared to $3.4 billion in the first quarter 2005. Average deposits were $2.4 billion in the second quarter 2005, compared to $2.5 billion in the first quarter 2005.
Geographic Market Segments
Comerica also provides market segment results for four primary geographic markets: Midwest & Other Markets, Western, Texas and Florida. The financial results below are presented on a FTE basis.
The following table presents net income (loss) by market segment.
(dollar amounts in millions) 2nd Qtr '05 1st Qtr '05 2nd Qtr '04
Midwest & Other Markets $111 48% $141 58% $149 59%
Western 84 37 80 33 77 30
Texas 29 13 20 8 22 9
Florida 5 2 3 1 5 2
229 100% 244 100% 253 100%
Finance & Other Businesses (12) (45) (61)
Total $217 $199 $192
Net income for Midwest & Other Markets was $111 million for the second quarter 2005, compared to $141 million for the first quarter 2005. Net interest income (FTE) of $272 million in the second quarter 2005 increased $8 million from the first quarter 2005. Average loans of $23.9 billion increased $584 million, or 10 percent on an annualized basis, primarily due to increases in Middle Market, Commercial Real Estate, and Global Corporate Banking loans. Average deposits of $18.9 billion in the second quarter 2005 were flat compared to the first quarter 2005.
Net income for the Western market was $84 million for the second quarter 2005, compared to $80 million for the first quarter 2005. Net interest income (FTE) of $196 million in the second quarter 2005 increased $10 million from the first quarter 2005. Average loans of $13.0 billion increased $315 million, or 10 percent on an annualized basis, primarily due to increases in National Dealer Services, Middle Market, and Commercial Real Estate loans. Average deposits of $16.8 billion in the second quarter 2005 increased $475 million, or 12 percent on an annualized basis, with the increase more than explained by higher deposits in the Financial Services Group.
Net income for the Texas market was $29 million for the second quarter 2005, compared to $20 million for the first quarter 2005. Net interest income (FTE) of $60 million in the second quarter 2005 increased $1 million from the first quarter 2005. Average loans of $4.9 billion increased $138 million, or 11 percent on an annualized basis, primarily due to growth in Middle Market, Commercial Real Estate, Small Business, and Energy Lending loans. Average deposits of $3.7 billion in the second quarter 2005 were flat compared to the first quarter 2005.
Net income for the Florida market was $5 million for the second quarter 2005, compared to $3 million for the first quarter 2005.
Conference Call and Webcast
Comerica will host a conference call to review second quarter 2005 financial results at 8 a.m. ET Wednesday, July 20, 2005. Interested parties may access the conference call by calling (706) 679-5261 (event ID No. 7007392). The call and supplemental financial information can also be accessed on the Internet at http://www.comerica.com/ . A replay of the conference call will be available approximately two hours following the call through Saturday, August 20, 2005. The conference call replay can be accessed by calling (800) 642-1687 or (706) 645-9291 (event ID No. 7007392). A replay of the Webcast can also be accessed via Comerica's "Investor Relations" page at http://www.comerica.com/ .
Comerica Incorporated is a financial services company headquartered in Detroit, strategically aligned into three major business segments: the Business Bank, Small Business & Personal Financial Services, and Wealth & Institutional Management. Comerica focuses on relationships and helping businesses and people to be successful.
Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "believes," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "outcome," "continue," "remain," "maintain," "trend," "objective" and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in the pace of an economic recovery and related changes in employment levels, the effects of war and other armed conflicts or acts of terrorism, implementation of Comerica's strategies and business models, management's ability to maintain and expand customer relationships, changes in the accounting treatment of any particular item, the impact of regulatory examinations, declines or other changes in the businesses or industries in which Comerica has a concentration of loans, including, but not limited to, the automotive industry, the anticipated performance of any new banking branches, the entry of new competitors in Comerica's markets, changes in the level of fee income, changes in applicable laws and regulations, including those concerning taxes, banking, securities and insurance, changes in trade, monetary and fiscal policies, including the interest rate policies of the Board of Governors of the Federal Reserve System, fluctuations in inflation or interest rates, changes in general economic conditions and related credit and market conditions and adverse conditions in the stock market. Comerica cautions that the foregoing list of factors is not exclusive. Forward-looking statements speak only as of the date they are made. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward- looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Comerica Incorporated and Subsidiaries
Three Months Ended
June 30, March 31, June 30,
(in millions, except per share data) 2005 2005 2004
PER SHARE AND COMMON STOCK DATA
Diluted net income $1.28 $1.16 $1.10
Cash dividends declared 0.55 0.55 0.52
Common shareholders' equity (at
period end) 30.60 29.81 28.75
Average diluted shares (in
thousands) 169,608 171,382 174,248
KEY RATIOS
Return on average common
shareholders' equity 16.99 % 15.73 % 15.35 %
Return on average assets 1.68 1.57 1.49
Average common shareholders' equity
as a percentage of average assets 9.88 9.99 9.70
Tier 1 common capital ratio * 7.90 8.04 8.00
Tier 1 risk-based capital ratio * 8.52 8.66 8.64
Total risk-based capital ratio * 12.09 12.49 12.91
Leverage ratio * 10.39 10.50 9.98
AVERAGE BALANCES
Commercial loans $24,122 $23,248 $22,178
Real estate construction loans 3,101 3,052 3,253
Commercial mortgage loans 8,513 8,315 8,050
Residential mortgage loans 1,357 1,310 1,209
Consumer loans 2,673 2,734 2,653
Lease financing 1,283 1,261 1,271
International loans 2,185 2,235 2,115
Total loans $43,234 $42,155 $40,729
Earning assets 47,412 46,645 47,639
Total assets 51,635 50,750 51,593
Interest-bearing deposits 25,005 25,662 26,183
Total interest-bearing liabilities 30,501 30,380 31,011
Noninterest-bearing deposits 14,995 14,120 14,730
Common shareholders' equity 5,100 5,072 5,003
NET INTEREST INCOME
Net interest income (fully taxable
equivalent basis) $484 $461 $448
Fully taxable equivalent adjustment 1 1 -
Net interest margin 4.09 % 4.00 % 3.77 %
CREDIT QUALITY
Nonaccrual loans $212 $269 $404
Other real estate 34 42 26
Total nonperforming assets 246 311 430
Loans 90 days past due and still
accruing 24 23 25
Gross charge-offs 43 46 76
Recoveries 14 8 20
Net charge-offs 29 38 56
Allowance for loan losses as a
percentage of total loans 1.41 % 1.52 % 1.90 %
Net loans charged off as a
percentage of average total loans 0.27 0.36 0.55
Nonperforming assets as a
percentage of total loans, other
real estate and nonaccrual debt
securities 0.57 0.75 1.07
Allowance for loan losses as a
percentage of total nonperforming
assets 248 204 177
ADDITIONAL DATA
Goodwill $247 $247 $247
Other intangibles 1 1 1
Loan servicing rights 19 19 19
Deferred mutual fund distribution
costs 7 7 10
Amortization of intangibles - - 1
Six Months Ended
June 30,
(in millions, except per share data) 2005 2004
PER SHARE AND COMMON STOCK DATA
Diluted net income $2.44 $2.02
Cash dividends declared 1.10 1.04
Common shareholders' equity (at
period end)
Average diluted shares (in thousands) 170,404 175,066
KEY RATIOS
Return on average common
shareholders' equity 16.36 % 14.02 %
Return on average assets 1.63 1.38
Average common shareholders' equity
as a percentage of average assets 9.93 9.87
Tier 1 common capital ratio *
Tier 1 risk-based capital ratio *
Total risk-based capital ratio *
Leverage ratio *
AVERAGE BALANCES
Commercial loans $23,688 $21,947
Real estate construction loans 3,077 3,303
Commercial mortgage loans 8,415 8,008
Residential mortgage loans 1,333 1,217
Consumer loans 2,703 2,640
Lease financing 1,272 1,281
International loans 2,210 2,182
Total loans $42,698 $40,578
Earning assets 47,031 47,230
Total assets 51,195 51,165
Interest-bearing deposits 25,332 26,402
Total interest-bearing liabilities 30,441 31,368
Noninterest-bearing deposits 14,560 13,858
Common shareholders' equity 5,086 5,049
NET INTEREST INCOME
Net interest income (fully taxable
equivalent basis) $945 $894
Fully taxable equivalent adjustment 2 1
Net interest margin 4.04 % 3.80 %
CREDIT QUALITY
Nonaccrual loans
Other real estate
Total nonperforming assets
Loans 90 days past due and still
accruing
Gross charge-offs $89 $160
Recoveries 22 34
Net charge-offs 67 126
Allowance for loan losses as a
percentage of total loans
Net loans charged off as a percentage
of average total loans 0.31 % 0.62 %
Nonperforming assets as a percentage
of total loans, other real estate
and nonaccrual debt securities
Allowance for loan losses as a
percentage of total nonperforming
assets
ADDITIONAL DATA
Goodwill
Other intangibles
Loan servicing rights
Deferred mutual fund distribution costs
Amortization of intangibles $- $1
* June 30, 2005 ratios are estimated
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
June March December June
30, 31, 31, 30,
(in millions, except share data) 2005 2005 2004 2004
ASSETS
Cash and due from banks $1,687 $1,835 $1,139 $1,865
-
Short-term investments 3,402 3,794 3,230 5,977
Investment securities available-for-
sale 3,947 3,687 3,943 4,332
Commercial loans 23,690 22,780 22,039 21,458
Real estate construction loans 3,168 3,035 3,053 3,282
Commercial mortgage loans 8,536 8,415 8,236 8,080
Residential mortgage loans 1,394 1,335 1,294 1,211
Consumer loans 2,701 2,700 2,751 2,672
Lease financing 1,296 1,262 1,265 1,266
International loans 2,239 2,209 2,205 2,130
Total loans 43,024 41,736 40,843 40,099
Less allowance for loan losses (609) (636) (673) (762)
Net loans 42,415 41,100 40,170 39,337
Premises and equipment 481 463 415 389
Customers' liability on acceptances
outstanding 35 40 57 44
Accrued income and other assets 2,722 2,591 2,812 2,599
Total assets $54,689 $53,510 $51,766 $54,543
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $19,236 $17,216 $15,164 $17,568
Interest-bearing deposits 24,817 25,490 25,772 26,343
Total deposits 44,053 42,706 40,936 43,911
Short-term borrowings 108 408 193 210
Acceptances outstanding 35 40 57 44
Accrued expenses and other liabilities 1,067 1,043 1,189 847
Medium- and long-term debt 4,309 4,283 4,286 4,597
Total liabilities 49,572 48,480 46,661 49,609
Common stock - $5 par value:
Authorized - 325,000,000 shares
Issued - 178,735,252 shares at
6/30/05, 3/31/05, 12/31/04 and
6/30/04 894 894 894 894
Capital surplus 433 433 421 398
Accumulated other comprehensive loss (99) (154) (69) (82)
Retained earnings 4,546 4,427 4,331 4,125
Less cost of common stock in treasury
- 11,513,612 shares at 6/30/05,
9,988,453 shares at 3/31/05, 8,259,328
shares at 12/31/04 and 7,124,990
shares at 6/30/04 (657) (570) (472) (401)
Total shareholders' equity 5,117 5,030 5,105 4,934
Total liabilities and shareholders'
equity $54,689 $53,510 $51,766 $54,543
FIRST AND FINAL ADD -- TABULAR MATERIAL -- TO FOLLOW
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20010807/CMALOGOSOURCE: Comerica Incorporated
Web site: http://www.comerica.com/
