Comerica Inc. is set to cut another five percent of its work force in a move that will affect all business units in all geographic markets.
Loan charge-offs and nonperforming loans both more than doubled during the quarter, driven by weakness from residential developers in California. The company increased its loan loss provision to $192 million, up from $108 million in December 2007.
Comerica also said it will focus on expanding existing business customer relationships, particularly in California and Texas.
The financial services holding company, which operates Comerica Bank, paid $34 million in severance-related expenses during the year — including $29 million in the fourth quarter alone — related to the layoff of another 5 percent of its work force during 2008.
The latest round of job cuts, to be completed during the first quarter of 2009, will affect 570 employees, according to Comerica spokesman Wayne Mielke. Comerica had 10,186 employees as of Dec. 31, he added.
As for further layoffs during the year, Mielke said he would not speculate on that possibility.
In addition, the bank intends to freeze salaries in 2009 for the top 20 percent of the work force, slow its banking center expansion program and continue to reduce capital and discretionary expenses in light of the weakened economy and frozen credit markets.
Comerica, which has major exposure in some of the most depressed regions of the country most affected by the housing downturn, reported $196 million in net income for 2008, a 71 percent decline from 2007. The bank set aside more money to cover potential losses on loans, received less interest income and had to cover an $84 million loss tied to auction rate securities during the year.
“Mounting job losses and an economy headed deeper into recession have dampened business and consumer confidence,” said Ralph Babb Jr., Comerica chairman and CEO, in a statement issued Jan. 22. Babb pointed out that the bank’s Tier 1 capital ratio is still strong, at 10.67 percent.
The bank recently tapped into $2.25 billion of capital funding through the U.S. Treasury’s Troubled Asset Relief Program.
Texas is still an important growth market for Dallas-based Comerica (NYSE:CMA), considering loan growth in the state during 2008 averaged 14 percent, compared to 6 percent overall.
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