Comerica Inc (CMA.N) reported a better-than-expected quarterly profit on Tuesday as a recovery in crude oil prices eased pressure on the regional lender's energy lending business and helped cut provision for future loan losses.
Dallas-based Comerica, like several other U.S. regional banks, has struggled with bad energy loans following the decline in oil prices.
The bank said provisions for bad loans dropped 89.2 percent to $16 million in the first quarter ended March 31.
Chief Executive Officer Ralph Babb said the decline reflected improved credit quality in the bank's energy portfolio and a meaningful benefit from higher interest rates, as well as the company's cost-cutting program, GEAR Up.
"If oil and gas prices remain at current levels, we believe energy loans could stabilize by the end of the year," Babb said in a post-earnings conference call.
Net interest income rose 5.1 percent to $470 million, mainly due to increased short-term rates.
The bank said net income attributable to common shareholders rose three-fold to $200 million.
Earnings per share, excluding items, was 98 cents per share, handily beating analysts' average estimate of 93 cents.
Noninterest expenses declined about $1 million to $457 million.
The first-quarter results included $24 million of tax benefits from employee stock transactions and $7 million in after-tax restructuring charges, Comerica said.
Total loans dropped marginally to $47.9 billion from $48.4 billion.
U.S. lenders have recently seen a slowdown in loan growth, driven partly by an uptick in interest rates that dissuaded consumers and companies from refinancing mortgage loans.
Mirroring the trend, Alabama-based Regions Financial Corp (RF.N) reported a 2 percent drop in average loans and leases in its first quarter ended March 31.
The bank's average business lending portfolio decreased $2.1 billion, or 4 percent, primarily due to declines in the direct energy and multi-family portfolios.
The lender's adjusted total revenue was flat at $1.39 billion.
Comerica's shares were marginally up and Regions Financial's stock was down 3.5 percent in morning trade.
(Reporting by Diptendu Lahiri in Bengaluru; Editing by Sriraj Kalluvila)