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Credit Issues Weigh on Comerica Earnings

Comerica, a large U.S. regional bank, said on Wednesday third-quarter profit fell a larger-than-expected 10 percent, hurt by credit-quality problems related to commercial real estate in Michigan and California.

Net income for the Dallas-based bank, which recently moved its headquarters from Detroit, fell to $181 million, or $1.18 per share, from $200 million, or $1.23, a year earlier.

Profit from continuing operations fell 8 percent to $180 million, or $1.17 per share. On that basis, analysts on average forecast $1.22 per share, according to Reuters Estimates.

Comerica set aside $45 million for loan losses, up from $15 million a year earlier, and net loan charge-offs rose to $40 million from $3 million. Nonperforming assets rose 48 percent to $291 million.

The increases reflected what Chief Executive Ralph Babb called "increased stress on our commercial real estate portfolios, particularly in Michigan and California."

Net interest margin weakened, falling to 3.66 percent from the second quarter's 3.76 percent.

Compared with a year earlier, lending income was little changed at $503 million, while fee income rose 18 percent to $230 million. Expenses rose 6 percent to $423 million.

Comerica said it moved to Dallas to be nearer the faster-growing states where it operates: Arizona, California, Florida and Texas. It became by far the largest bank based in Texas. The bank expects "flat" 2007 loan growth in the Midwest, and loans to grow at a low double-digit rate elsewhere.

Shares of Comerica closed Tuesday at $50.05 on the New York Stock Exchange. The shares have fallen more than 16 percent this year, compared with a 12 percent drop in the Philadelphia KBW Bank Index.