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Jun 30, 2020
Comerica Q2 2020 Earnings Report
Reported net income of $113 million, driven by loan and deposit growth, with solid credit quality and increased credit reserves.
Key Takeaways
Comerica reported a net income of $113 million, or $0.80 per share, for the second quarter of 2020. Loan and deposit growth drove average balances to record highs, including $2.6 billion in Paycheck Protection Program loans. Credit quality remained solid, with net charge-offs of 37 basis points.
Net income was $113 million, or $0.80 per share.
Loan and deposit growth drove average balances to record highs, including $2.6 billion in Paycheck Protection Program loans.
Credit quality remained solid with net charge-offs of 37 basis points; excluding energy, net charge-offs were 4 basis points.
Allowance for credit losses increased to 1.99% of total loans.
Comerica
Comerica
Forward Guidance
Based on management expectations for recessionary conditions, Comerica anticipates a decline in average loans, stable average deposits, a decrease in net interest income, a provision for credit losses reflective of the economic environment, a decline in noninterest income, and an increase in noninterest expenses for the third quarter of 2020 compared to the second quarter of 2020.
Positive Outlook
- Average deposits relatively stable as customers utilize economic stimulus proceeds.
- Offset by lower wholesale debt and one additional day.
- Continued expense discipline
- Reduction in COVID-19-related costs.
- Capital reflects declaration of first preferred stock dividend and a focus on supporting customers' financing needs, as well as maintaining an attractive common dividend.
Challenges Ahead
- Decline in average loans reflects lending to small businesses with a full quarter benefit of PPP, more than offset by decreases in Mortgage Banker Finance, Large Corporate and National Dealer Services.
- Decrease in net interest income resulting from a $10 million to $15 million net impact of lower interest rates (assumes 1-month LIBOR of 17 basis points and deposit cost of 20 basis points) and lower loan balances
- Provision for credit losses reflective of economic environment, including the effects resulting from the duration and severity of the COVID-19 pandemic.
- Decline in noninterest income due to reduced card fees related to transaction activity and lower market-based investment banking and derivative fees, partially offset by higher service charges on deposit accounts due to increased activity. Higher securities trading income and deferred compensation levels in second quarter 2020 not expected to repeat.
- Increase in noninterest expenses, reflecting technology and occupancy projects, as well as higher charitable contributions and seasonal impacts of marketing and staff insurance expenses