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Regional banks did a much better job of expanding revenue than their megabank counterparts in the third quarter, but they had to spend more to do so and risk angering investors in a tight-margin environment.
October 15
Comerica in Dallas reported lower third-quarter profit that reflected higher expenses.
The $71 billion-asset company said in a press release Friday that its net income fell 12% from a year earlier, to $134 million, or 74 cents a share.
Net interest income rose 2%, to $422 million. Total loans rose by nearly 3%, to $48.9 billion, with increases in commercial-and-industrial, residential mortgage and consumer loans. The net interest margin compressed by 13 basis points, to 2.54%.
Comerica reported about $3.2 billion of outstanding loans tied to the energy sector, plus another $615 million in loans to businesses that obtain a sizable portion of revenue from energy or could be hurt by prolonged low oil prices. Comerica said that net chargeoffs tied to energy loans "continued to be low," while nonaccruals of energy loans rose by a "modest" $7 million during the third quarter.
The provision for loan losses was $26 million in the third quarter, compared to $5 million a year earlier.
Noninterest income rose 23%, to $264 million, because of higher card fees, fiduciary income and service charges.
Noninterest expense increased 16%, to $461 million, on higher technology-related contract labor expenses and more outside processing expenses. The expenses included a litigation reserve release of $3 million. The efficiency ratio was 67.08% at June 30, compared to 62.87% a year earlier.
