Comerica Affected By Tough Market
Comerica Inc.'s fourth-quarter net income dropped by more than a third when compared to both the third quarter of 2007 and the fourth quarter of 2006. The company said that fourth-quarter earnings were largely impacted by a decrease in net interest margin and an increase in loan loss provisions.
Company chairman and CEO Ralph W. Babb Jr. stated that the higher loan loss provision was due to the challenges in residential real estate development in certain areas. "While we continued to execute our strategy, reflected by strong loan growth, particularly in our high-growth markets, challenges in the residential real estate development portfolio affected our performance," said Mr. Babb. The reported fourth-quarter income from continuing operations of $117 million, or $0.77 per diluted share, was down 35% from $180 million, or $1.17 per diluted share, reported for the third quarter 2007. It also represented a 37% drop from $185 million, or $1.16 per diluted share, reported for the fourth quarter of 2006.
The fourth quarter of 2007 included a $108 million provision for loan losses, 140% more than the $45 million loan loss provision for the third quarter of 2007 and nearly quadruple the $22 million provision for the fourth quarter of 2006.
The fourth quarter also included $13 million of non-interest expense related to Comerica's membership in Visa Inc. and the fourth quarter of 2006 included $47 million of non-interest income from a lawsuit that was settled.
Income from continuing operations for 2007 was $682 million, or $4.40 per diluted share, down 13% from $782 million, or $4.81 per diluted share, for 2006. The provision for loan losses was $212 million for 2007, 473% more than the $37 million provision for 2006.
In a year-over-year comparison between 2007 and 2006, when financial services division loans are excluded, average loan growth was 7%, with 16% growth in the Texas market, 13% in the Western market and 11% in the Florida market, with the Midwest market down 1%.
The net interest margin was 3.66%. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/