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Lower Loan & High Costs to Hurt Comerica's (CMA) Q2 Earnings
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Comerica Incorporated (CMA - Free Report) is scheduled to report second-quarter 2024 results on Jul 19, before the opening bell. The bank’s revenues and earnings are likely to have declined from the year-ago quarter’s reported figures.
Comerica’s earnings for the first quarter of 2024 surpassed the Zacks Consensus Estimate by 14.2%. Results were primarily aided by the bank’s strong capital ratios, indicating its availability of adequate capital to use to deal with any unexpected losses. However, a decline in revenues and higher expenses were major headwinds.
CMA has an impressive surprise history. Its earnings surpassed estimates in each of the trailing four quarters, the surprise being 8.64%, on average.
The company’s activities in the to-be-reported quarter were unable to instill analysts’ confidence in the stock. The Zacks Consensus Estimate for second-quarter earnings of $1.19 per share revised nearly 1% downward in the past 30 days. Also, the estimate indicates a 40.8% decline from the year-ago quarter’s reported figure.
The consensus estimate for second-quarter 2024 revenues is pegged at $813.6 million, indicating a decline of 11.9% from the year-ago reported figure.
Loans and NII: Per the Federal Reserve’s latest data, demand for commercial and industrial loans improved from the first quarter of 2024-end, while consumer loan demand weakened. This is likely to have affected the company’s average interest-earning assets in the second quarter of 2024. The Zacks Consensus Estimate of $73.2 billion for average earning assets indicates a sequential decrease of 3.4%.
Markedly, from the first quarter of 2024-end to the end of May, the company’s average loans decreased by $0.6 billion to $50.8 billion. The fall was due to a decline in equity fund services & private banking lending. Management expects average loans to remain flat or decline 1% sequentially due to weak loan demand in the second quarter of 2024.
Average deposits decreased $2 billion to $63.3 billion from the first quarter to May-end due to a reduction in brokered time deposits. The company expects average deposits to decline in the range of 2-3% from the first quarter of 2024. Moreover, interest-bearing deposits constituted a higher proportion of deposits. The unfavorable shift in the deposit mix will likely impede NII growth for CMA.
The steady interest rates during the second quarter, along with the inverted yield curve in the June-ended quarter, are also expected to have weighed on NII growth.
The consensus estimate for NII is pegged at $530.1 million, which indicates a decline of 3.3% from the prior quarter's reported figure. Management expects NII to decline in the 1-2% range, excluding the non-cash Bloomberg Short-Term Bank Yield (BSBY) impact.
Fee Income: Consumer spending activities were decent in the second quarter of 2024. As card fees are major contributors to CMA’s fee income, the favorable trend is likely to have aided its fee growth during the quarter under discussion. The Zacks Consensus Estimate for card fees is pegged at $68 million, indicating a 3% rise from the prior quarter.
Global deal-making witnessed a rebound in the second quarter, and the performance of the capital markets business, including issuance activities, improved. Further, the IPO market activity was decent, given the impressive equity market performance. Thus, the company’s capital market fees are likely to have been positively impacted.
The Zacks Consensus Estimate for capital market income is pegged at $33.5 million, indicating a year-over-year increase of 11.7%.
The Zacks Consensus Estimate for service charge on deposit is pegged at $46 million, indicating a rise of 2.4% from the prior quarter.
The consensus estimate for overall fee income is pinned at $282.2 million, indicating a 19.6% increase from the last quarter.
Management projects adjusted non-interest income to sequentially rise in the range of 3-4%, excluding non-cash BSBY impact. The growth is likely to be driven by improvement in almost all customer line items.
Expenses: The company is expected to have incurred higher expenses due to a rise in salaries and benefits expenditures. Such rising costs are estimated to have weighed on its expense base to some extent in the quarter under review and hindered bottom-line growth. However, as compared with the previous quarter, expenses are likely to have reduced due to lower seasonal expenses. On a sequential basis, management expects adjusted non-interest expenses to decline 3-4%.
Asset Quality: The company is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of an economic slowdown.
The Zacks Consensus Estimate for non-performing loans is pegged at $222 million, indicating a rise of 2.3% from the prior quarter's reported figure.
What Our Model Predicts
Our proven model does not predict an earnings beat for Comerica this time around. This is because it does not have the right combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) to increase the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Comerica has an Earnings ESP of -0.39%.
Zacks Rank: The company currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Here are some bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.
Over the past 60 days, the Zacks Consensus Estimate for NTRS' quarterly earnings has moved upward by 1.7%.
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.22% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2014 earnings on Jul 18.
MTB’s quarterly earnings estimates have moved marginally downward over the past seven days.
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Lower Loan & High Costs to Hurt Comerica's (CMA) Q2 Earnings
Comerica Incorporated (CMA - Free Report) is scheduled to report second-quarter 2024 results on Jul 19, before the opening bell. The bank’s revenues and earnings are likely to have declined from the year-ago quarter’s reported figures.
Comerica’s earnings for the first quarter of 2024 surpassed the Zacks Consensus Estimate by 14.2%. Results were primarily aided by the bank’s strong capital ratios, indicating its availability of adequate capital to use to deal with any unexpected losses. However, a decline in revenues and higher expenses were major headwinds.
CMA has an impressive surprise history. Its earnings surpassed estimates in each of the trailing four quarters, the surprise being 8.64%, on average.
The company’s activities in the to-be-reported quarter were unable to instill analysts’ confidence in the stock. The Zacks Consensus Estimate for second-quarter earnings of $1.19 per share revised nearly 1% downward in the past 30 days. Also, the estimate indicates a 40.8% decline from the year-ago quarter’s reported figure.
The consensus estimate for second-quarter 2024 revenues is pegged at $813.6 million, indicating a decline of 11.9% from the year-ago reported figure.
Comerica Incorporated Price and EPS Surprise
Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote
Factors at Play
Loans and NII: Per the Federal Reserve’s latest data, demand for commercial and industrial loans improved from the first quarter of 2024-end, while consumer loan demand weakened. This is likely to have affected the company’s average interest-earning assets in the second quarter of 2024. The Zacks Consensus Estimate of $73.2 billion for average earning assets indicates a sequential decrease of 3.4%.
Markedly, from the first quarter of 2024-end to the end of May, the company’s average loans decreased by $0.6 billion to $50.8 billion. The fall was due to a decline in equity fund services & private banking lending. Management expects average loans to remain flat or decline 1% sequentially due to weak loan demand in the second quarter of 2024.
Average deposits decreased $2 billion to $63.3 billion from the first quarter to May-end due to a reduction in brokered time deposits. The company expects average deposits to decline in the range of 2-3% from the first quarter of 2024. Moreover, interest-bearing deposits constituted a higher proportion of deposits. The unfavorable shift in the deposit mix will likely impede NII growth for CMA.
The steady interest rates during the second quarter, along with the inverted yield curve in the June-ended quarter, are also expected to have weighed on NII growth.
The consensus estimate for NII is pegged at $530.1 million, which indicates a decline of 3.3% from the prior quarter's reported figure. Management expects NII to decline in the 1-2% range, excluding the non-cash Bloomberg Short-Term Bank Yield (BSBY) impact.
Fee Income: Consumer spending activities were decent in the second quarter of 2024. As card fees are major contributors to CMA’s fee income, the favorable trend is likely to have aided its fee growth during the quarter under discussion. The Zacks Consensus Estimate for card fees is pegged at $68 million, indicating a 3% rise from the prior quarter.
Global deal-making witnessed a rebound in the second quarter, and the performance of the capital markets business, including issuance activities, improved. Further, the IPO market activity was decent, given the impressive equity market performance. Thus, the company’s capital market fees are likely to have been positively impacted.
The Zacks Consensus Estimate for capital market income is pegged at $33.5 million, indicating a year-over-year increase of 11.7%.
The Zacks Consensus Estimate for service charge on deposit is pegged at $46 million, indicating a rise of 2.4% from the prior quarter.
The consensus estimate for overall fee income is pinned at $282.2 million, indicating a 19.6% increase from the last quarter.
Management projects adjusted non-interest income to sequentially rise in the range of 3-4%, excluding non-cash BSBY impact. The growth is likely to be driven by improvement in almost all customer line items.
Expenses: The company is expected to have incurred higher expenses due to a rise in salaries and benefits expenditures. Such rising costs are estimated to have weighed on its expense base to some extent in the quarter under review and hindered bottom-line growth. However, as compared with the previous quarter, expenses are likely to have reduced due to lower seasonal expenses. On a sequential basis, management expects adjusted non-interest expenses to decline 3-4%.
Asset Quality: The company is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of an economic slowdown.
The Zacks Consensus Estimate for non-performing loans is pegged at $222 million, indicating a rise of 2.3% from the prior quarter's reported figure.
What Our Model Predicts
Our proven model does not predict an earnings beat for Comerica this time around. This is because it does not have the right combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) to increase the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Comerica has an Earnings ESP of -0.39%.
Zacks Rank: The company currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Here are some bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.
Northern Trust Corporation (NTRS - Free Report) has an Earnings ESP of +1.56% and carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2024 results on Jul 17. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 60 days, the Zacks Consensus Estimate for NTRS' quarterly earnings has moved upward by 1.7%.
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.22% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2014 earnings on Jul 18.
MTB’s quarterly earnings estimates have moved marginally downward over the past seven days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.