• Earnings for Fiscal Year 2024: $698 million or $5.02 per share.
• Fourth Quarter Earnings: $170 million or $1.22 per share.
• Average Loans: Declined less than 0.5%, with a $500 million reduction in Commercial Real Estate.
• Average Deposits: Decreased $550 million or 0.9%, with a $1.4 billion decline in brokered CDs.
• Net Interest Income: Increased $41 million to $575 million.
• Net Charge-Offs: Remained low at 13 basis points.
• Allowance for Credit Losses: Relatively flat at 1.44% of total loans.
• Noninterest Income: Decreased $27 million, including a $19 million realized loss from securities repositioning.
• Noninterest Expenses: Increased $25 million over the prior quarter.
• Estimated CET1 Capital Ratio: 11.89%.
• Share Repurchases: $100 million in the fourth quarter, with plans for $50 million in the first quarter of 2025.

• Warning! GuruFocus has detected 7 Warning Sign with SFNC.

Release Date: January 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Comerica Inc (NYSE:CMA) reported strong credit quality with historically low net charge-offs, demonstrating disciplined underwriting.
• The company increased its CET1 capital ratio by 80 basis points and resumed share repurchases, reflecting a conservative approach to capital management.
• Customer deposit growth was observed, excluding brokered CDs, with a significant contribution from Middle Market General.
• Comerica Inc (NYSE:CMA) successfully managed deposit pricing, which benefited net interest income.
• Investments in capital markets yielded results, including the closure of their first M&A advisory transaction, indicating potential for expanded revenue.

Negative Points

• Loan demand remained muted throughout much of the year, with Commercial Real Estate paydowns expected to offset growth in other areas.
• Noninterest income decreased due to a $19 million realized loss from securities repositioning and a decline in deferred compensation.
• Expenses increased by $25 million over the prior quarter, driven by higher salaries, benefits, and legal expenses.
• The efficiency ratio remained elevated in the high 60s, indicating room for improvement in operational efficiency.
• The company faces ongoing challenges from higher interest rates, which have pressured customer profitability and contributed to an increase in nonperforming assets.

Q & A Highlights

Q: Can you touch a little bit on your loan growth outlook and what you've seen over the last few months? A: Over the last few months, the tone has changed with more customer optimism going into the new year. We are starting the year with a better pipeline than a year ago, which is encouraging. The only area with limited activity is Commercial Real Estate (CRE), which we expect to be a headwind in 2025. Overall, customer sentiment has improved and seems less tied to interest rate outlook than before. - Peter Sefzik, Chief Banking Officer

Q: On brokered deposits, how much room is there to pay down these higher-cost sources of funding if loan growth remains weak? A: We ended the year with about $1.1 billion in brokered deposits and expect these to decrease throughout 2025, potentially eliminating them by year-end. These deposits are costly, and our goal is to replace them with strong core customer deposit growth, improving our funding mix efficiency. - James Herzog, Chief Financial Officer

Q: What is Comerica's long-term efficiency ratio target, and what can drive it down from the current high 60s level? A: We aim for an efficiency ratio in the 50s to meet our ROE objectives. Achieving this requires a combination of revenue growth and expense management. We are committed to growing revenue while ensuring expenses grow at a lower rate, maintaining positive operating leverage. - James Herzog, Chief Financial Officer

Q: Does your loan growth outlook for 2025 include any uptick in utilization rates? A: No, our outlook does not factor in an increase in utilization rates, which have been flat for some time. If utilization were to pick up, it would be beneficial, but our current projections assume it remains stable. - Peter Sefzik, Chief Banking Officer

Q: Can you provide more color on the increase in Non-Performing Assets (NPAs) in the fourth quarter? A: The NPA increase was modest, centered around a few names, with one $30 million Commercial Real Estate loan moving into the NPA category. The increase is largely due to higher interest rates affecting profitability and debt servicing, particularly in consumer discretionary sectors. Overall, our credit portfolio performed well, and the migration was expected. - Melinda Chausse, Chief Credit Officer

For the complete transcript of the earnings call, please refer to the full earnings call transcript.