Why the stock is crashing: Comerica Incorporated (NYSE: CMA) stock crashed over 15.7% in the pre-market session on January 17th, 2019 (Source: Google finance). Non-interest income came in at $250 million, down 12.3% on a year-over-year basis. Lower card fees and service charge on deposits were partially offset by higher fiduciary income and brokerage fees. As of Dec 31, 2018, total assets and common shareholders’ equity were $70.8 billion and $7.5 billion, respectively, compared with $71.5 billion and $8 billion as of Dec 31, 2017. As of Dec 31, 2018, the company’s tangible common equity ratio was 9.78%, down 54 bps year over year.
Financial Performance: Net interest income increased 12.7% to $614 million. Moreover, net interest margin expanded 47 basis points (bps) to 3.58%. Further, non-interest expenses totaled $448 million, down 7.2% year over year. The decline was chiefly due to lower outside processing fee and FDIC insurance expenses, partially offset by higher salaries and benefits expense and equipment costs.
CMA in the fourth quarter of FY 18 has reported the adjusted earnings per share of $1.88, beating the analysts’ estimates for the adjusted earnings per share of $1.86. The company had reported the adjusted revenue growth of 4.1 percent to $864 million in the fourth quarter of FY 18, which is in line with the analysts’ estimates for revenue of $864 million.
Total loans rose 2% year over year to $50.1 billion. However, total deposits decreased about 4% from the prior-year quarter to $55.6 billion.
Total non-performing assets plunged 32.2% year over year to $230 million. Also, allowance for loan losses was $701 million, down 7%. Additionally, allowance for loan losses to total loans ratio was 1.34% as of Dec 31, 2018, down from 1.45% as of Dec 31, 2017. In addition, provision for credit losses declined 6% from the year-ago quarter. Furthermore, Comerica reported net charge-offs of $11 million compared with $16 million recorded in prior-year quarter.
Common equity tier 1 capital ratio was 11.12%, down from 11.68% reported in the year-ago quarter.
For FY 19, the company anticipates 4-5% higher net interest income, including the benefit of short-term rate increase. Non-interest income is estimated to be 2-3% higher resulting from GEAR Up opportunities driving growth in treasury management and card fees, along with fiduciary income.
Non-interest expenses are predicted to be 3% lower, reflecting the end of restructuring charges from the GEAR Up initiatives, lower FDIC insurance expenses by $16 million from the discontinuance of the surcharge, lower compensation and pension expense. Provision for credit losses is likely to be 15-25 bps and net charge-offs are expected to be low.