Comerica Shares Fall on Revised Earnings
Comerica Inc., a Detroit bank with 25% of its assets in California, surprised Wall Street on Wednesday when it sharply increased its provisions for loan losses, restated its second-quarter results and said it would take an $86-million charge to reflect the falling value of its asset-management subsidiary.
The news slammed Comerica’s stock, which fell $10.19, or 20%, to $40 on the New York Stock Exchange.
In restating its second-quarter results, Comerica added $40 million in charges for bad loans. It said the move resulted from discussions with state and federal regulators after their annual examination of its California operations. Of the $40 million, $22 million was related to loans to independent movie producers, Comerica Chief Financial Officer Elizabeth Acton said.
The bank said it also will add $207 million in provisions for loan losses in the third quarter, reflecting problems in joint lending with other banks to major corporations and poorer-than-expected economies in all its major markets.
“Our assessment of the economy today is a fair bit more negative than a few months ago,” Acton said, citing weakness in retail, manufacturing and some service and technology businesses.
Comerica lowered the value of its Munder Capital Management unit by $86 million because the firm is now worth less than what the bank paid for it.
Though it inherited problem loans when it bought Inglewood-based Imperial Bank two years ago, Comerica is a well-regarded “super-regional” bank, and its disclosures surprised the industry.
The announcement, combined with a Bank of New York Co. profit warning and analysts’ reduced expectations for big investment banks, drove other bank stocks down sharply. City National Corp. in Beverly Hills fell by $3.18 to $44.82, a 6.6% decline, while UnionBanCal Corp. in San Francisco was down $2.45 at $40.80, or 5.6%, both on the NYSE.
UnionBanCal Vice Chairman Richard C. Hartnack, a director of the Federal Reserve Bank of San Francisco, said he has seen no increase in regulators’ scrutiny of banks.
“Based on my experience, this doesn’t portend any dramatic follow-on announcements from other institutions,” Hartnack said.
