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Comerica: Crisis affecting small business

Comerica Inc. executives said this morning that the weak economy is affecting the bank's small-business and middle-market commercial customers. "We are seeing softness in small business and middle market," Ralph Babb Jr., Comerica's chairman and CEO, said during a conference call with analysts.

The Dallas-based bank, the second-largest in Michigan in terms of deposits, reported this morning that its third-quarter net income plunged 84.5% to $28 million, or 18 cents per share, compared with $181 million, or $1.17 a share, in the year-ago period. Comerica's Midwest market, which largely consists of Michigan, accounted for the majority of its profits in the quarter

. Babb said Comerica is still evaluating the federal government's new programs to help shore up the country's banks. Because the details of how the programs will work are still being rolled out, he could not say what Comerica would do or how it will be affected. In Michigan, the bank is doing more frequent reviews of its loans for small businesses and middle-market customers as it tries to head off potential problems, said Dale Greene, Comerica's chief credit officer.

"The issues remain manageable," he said. The bank's major problem most of this year has been loans made to California residential real estate developers that have gone sour due to the housing slump. But executives said today that the rate of deterioration with these loans is slowing. Though Comerica is one of the few regional banks still making money, it has had to set aside significantly more money to cover an expected increase in loan losses. Its nonperforming loans in the third quarter more than tripled to $863 million from $272 million in the year-earlier period To bolster its capital, Comerica, like other banks, has cut its dividend, reduced its work force and slowed the rate at which it's adding new bank branches. It's also making fewer loans. Despite the financial turmoil, the bank said, it still has good access to capital. In fact, the increase in net new retail customers during the last four weeks is the best it's seen all year as many people have flocked to one-year certificates of deposit. "Our core operating performance has been stable this year," Babb said.

Source:

http://www.freep.com/article