Comerica in Dallas retroactively cut its fourth-quarter profit by $14 million after discovering that a single borrower — an Arizona company the bank did not identify — was unlikely to repay its loan.
The $72 billion-asset Comerica lowered its fourth-quarter net income 11% to $115 million from the previously reported figure of $129 million. It also reduced earnings per share 10% to 64 cents.
Comerica also recorded a $26 million chargeoff on the loan; and it decreased incentive compensation expense, which cut noninterest expense 0.6% to $486 million.
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Management has also been allocating more resources to other markets to add loans and boost fee income in businesses such as card services and wealth management. Such moves are designed to offset fallout from an energy book that shrunk by 14% last year.
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There is a growing belief that reserves for energy loans should represent 5% of a bank's exposure to the sector. Three banks have already announced plans to move in that direction, prompting speculation as to which other lenders will be next.
January 13
The bank said it recently discovered irregularities at the borrower, which it described as an Arizona sales and appraisal company. The customer had a $26 million outstanding loan balance, Comerica said.
"Our investigation is ongoing and we are assessing all circumstances surrounding this matter," Comerica Chairman and Chief Executive Ralph Babb said in a Tuesday news release. "We remain confident in our systems and processes and will vigorously prosecute all legal options available to us to recover on this isolated loss."
