Comerica ((CMA)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Comerica’s recent earnings call presented a balanced sentiment, showcasing strong capital management, an increase in customer deposits, and strategic technological investments. Despite these positive strides, concerns were raised over challenges in loan growth, particularly in commercial real estate, and rising noninterest expenses. The sentiment remains cautiously optimistic with a promising outlook for 2025, although tempered by existing hurdles.
Capital Management and Share Repurchases
Comerica demonstrated robust capital management by increasing its CET1 capital ratio by 80 basis points and resuming share repurchases, returning $100 million in capital in the fourth quarter of 2024. This indicates a strong commitment towards enhancing shareholder value and maintaining a solid capital position.
Improvement in Customer Deposits
The company reported a significant improvement in customer deposits, excluding brokered CDs, which grew by over $800 million or over 1% in the fourth quarter. Period-end deposits also saw an increase of $700 million, reflecting customer confidence and effective deposit gathering strategies.
Strategic Investments and Technological Advancement
Comerica is focusing on strategic investments by enhancing capabilities in relationship management, financial advisory, and technology. The company aims to transition nearly all applications to the cloud or SaaS platforms by the end of 2025, aligning with digital transformation trends to improve efficiency and customer service.
Strong Credit Quality
Credit quality remains a strength for Comerica, with net charge-offs at a low 13 basis points, showcasing disciplined underwriting practices and historically low levels of credit losses. This solid credit performance underscores the bank’s prudent risk management.
Positive Outlook for 2025
Looking forward to 2025, Comerica is optimistic about achieving a 2% average loan growth excluding commercial real estate, a 6% to 7% increase in net interest income, and a 4% rise in noninterest income. This outlook is buoyed by a strategic focus on efficiency, customer growth, and favorable economic conditions.
Challenges in Commercial Real Estate
The company acknowledged challenges in commercial real estate, reporting a $500 million reduction in loans within this sector, which impacted overall loan growth. This segment remains a critical area for growth management and strategic focus.
Noninterest Income and Expenses
Comerica faced a decrease in noninterest income by $27 million, largely due to a $19 million securities repositioning loss. Additionally, noninterest expenses rose by $25 million, driven by elevated legal and litigation-related costs and increased funding to its charitable foundation, highlighting areas needing expense discipline.
Guidance for 2025
Comerica’s guidance for 2025 reflects a positive stance, projecting full-year average loans to stay flat or grow by 1%, with potential 2% growth excluding commercial real estate impacts. Net interest income is anticipated to rise by 6% to 7%, bolstered by the BSBY cessation and a more efficient funding mix. Noninterest income is expected to increase by 4%, with expenses up by 3%, all while maintaining a strong CET1 capital ratio above 10%, aiming for around 11%.
In summary, Comerica’s earnings call underscores a balanced sentiment with both promising advancements and notable challenges. While the company is navigating hurdles in loan growth and managing expenses, its strategic investments and strong capital position provide a foundation for optimism in 2025. With a focus on efficiency and customer-centric growth, Comerica is positioned to capitalize on favorable trends in the coming year.
