CMA - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Comerica Third Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator like Investor conference Relations. now Persons, to turn of Director to would over the Darlene I Ma'am, may you begin.

Darlene Persons

Thank you, Regina.

our of For we those hour top had us, with the some technical who difficulty at just webcast portion. joined the

and now Guilfoile. Curtis to third welcome Officer, Farmer; Participating this Chief quarter morning Chairman, be Duprey; call. Comerica’s call conference Financial over will Good Chief earnings Ralph We’re Pete starting on and Credit again. Officer, XXXX Babb; Dave President,

to referring are slides provide this SEC’s presentation, of be During site, and in release will The our detail. press Web as comerica.com. slides section available which presentation Investor well we additional the Relations the Web site our as on

contains forward-looking And regard, get mindful the expectations. should to that started, of statements. be would you from materially we results and cause remind actual I can call uncertainties you vary that risks to in Before conference like that this

speak no X, actual Safe well that presentation in SEC the incorporate only to our the release date Harbor Forward-looking update of this call cause I into factors you I as filings this results statements. Slide on to could forward-looking to obligation differ. today’s for of as refer statements undertake which statement we as and any

over on Ralph begin Now I’ll turn the call X. Slide to who will

Ralph Babb

recoveries quarter. or earnings increasing interest prudently second share pricing. share credit loan as quality to increased $X.XX, transactions. charges employee restructuring we the continue a per of help thank interest had an from Good compared XX% last to reported deposit continued as third and higher from $X.XX excluding year, rates stock morning adjusted on with for Revenue quarter and we nonaccrual solid, you of growth was quarter-over-quarter benefits improve. significant for X% joining Also, to per earnings and manage basis, tax quarter XX% our we the XX% call. XXXX our Today, to third increase Relative

in with year of XX.XX% fee ROA GEAR lowered ROE resulted returns, our our expenses XX% past over addition, improvement ratio Up quarter. of and an the has third for increased of has an efficiency This substantial income. the In and initiative X.XX%, and in

X to in stable of loans our quarter. to National third Seasonality the Services. quarter average billion the for quarter an $XX.X third results, Slide of Dealer Turning and compared in Banker increase drove overview decline a and was second Mortgage an

we a pricing then remain for loan deposits is decreased deposits cautious discipline This customers to commercial has environment. competitive our and slow noninterest-bearing progress normal of in highly in also Average increased began July middle which deposits the in is and line global Our as the Washington with which tensions volume interest-bearing in underwriting our declined. been seasonal pattern. rebound while are reflected through Total maintaining down. Furthermore, industry and is intensify.

customers their addition, deposits in are In business. using

We X% are income to any adjustments million. our not standard $XXX over carefully or to interest our monitoring deposit Net $XX made million base increased have pricing. and

strong by mentioned, interest nonaccrual only with charge-offs recoveries. and continued net points. declines benefit interest quality increased I primarily be and criticized rates was loans Credit driven to basis this As nonaccrual in and the XX from of

into a Our completed exam $XX remains recently Shared of resulting our total National been The provision stable million. has reserve Credit incorporated in results.

impact the It as demonstrate we customers is with and to The value far that of facilities our address and relationship model. manageable. can these working Houston been to As minor credit hurricanes closely situations the damage are was we the extraordinary Florida, has at our in needs. their

California. reserves mention reflect wildfires our Our expectation to losses. of the recent I appropriately also want in

our been of Sonoma and in none located impacted. facilities valleys no have or We Napa employees have the

significant now, we southern property to California. affected damage. of areas. of have we any not in And Also, loans northern the not in We in of customers are impacts approximately million as any California aware aware $XXX customer are

We abreast and and the employees, stand we stable. this communities. customers assist Noninterest our to ready of situation will stay income was

Continued gaining GEAR our growth initiative. reflects traction in with the Up we fees are card

income were second income customer conversion. as increased expenses fiduciary additional decreased. a in due card Following derivative center our such as higher mainly call expected. up and staffing to labor in Noninterest necessary strong a quarter, temporary to assist Salaries

reap decrease to increased This continue our outside higher and In well growing was million significantly the expense to our a benefits fees. partly XX%. decreased $X addition, we shareholders as closely charges. we as note, third by dividend offset expenses We have Of manage GEAR excluding card relative related the we restructuring to increased million had for shares quarter and in processing restructuring by or our charges, technology initiatives. million repurchased increased as X year from expenses Up our last as payout our $XXX to

independent key our as of progress noteworthy, We appointed new Chief buyback year. expect to we and Commercial of last Company She skills director, the President expertise. who stock Smith, a Executive or including management Board relevant business financial Barbara brings increase gradually is significant a through Metals month our Officer number Dallas-based the Also CMC. and

over a board with go over a in And to quarter Dave more We diverse good backgrounds. leadership and mix I turn now, financial will and strong the who the of have industry, detail. call will

David Duprey

morning, Good everyone. Thanks, Ralph.

Slide to X. Turning

to were As Ralph average mentioned, compared stable the third quarter. second loans quarter

benefitted loan time. our partly pickup grew are sales that from shorter normal modestly was summer mortgages in the loan time Mortgage loans yields. average muted, we growth million warehouse, as by the offset $XXX home significantly sitting in While with dwell increased almost Banker known

weighted heavily compared industry the refi with Our XX%. to portfolio continues versus purchases of average be approximately purchase to home XX% to

the pace several this inventory summer decreased We were real key services. X.X estate increased such Average environmental as technology refinanced are our as specialty General portfolio and billion business for stalled to seasonal cycle. slower growth in models. as loans projects growth million new our long-term or the well due and to point we cautious asset in almost business across and national preparation as about the sales XXX in also of total X% million Equity about specifically remaining of Fund to or Commercial life as market, Mortgage activity. sciences, energy Plan the Banker decreased in Equity as saw XXXX declines by to Floor period Dealer to decreased appropriately delivery as capital of Dealers, far loans Services market opportunities Texas. lines auto and of due offset loans due slowdown, dealers $XXX Michigan declined markets in Fund slightly Total Our and middle particularly end a and reduced Services. typical partly

increased including increase point in basis XX interest LIBOR XX-day rates XX added a deals XX Our points higher to very points, basis XX yield, average loan points. nonaccrual basis basis recoveries strong added our

a dynamics shift impacted negatively which not X positive migration such $X valuation repeated. million mix lease was pricing quarter was credit quarter points. yield. residual added as our X This Other third adjustment basis the second The in to portfolio added basis by and points on loans, focus

customers to however, Average yet progress in in middle billion as quarter deposits included increase X% pipeline Commercial are a deposits as quarter interest-bearing in over second after so; a deposits, remain and this geopolitical X% Slide we DC the the loan $X tensions. of deposits up estate end XX.X sentiment optimistic past commit balances of put than remained significantly. third Our to Period increased cash commitments the to market higher relative the billion the real given the primarily our customers quarter. shown month decrease in solid believe slow declined significantly to since the about and average subdued, positive reflects X% accounts. deposits and quarter. overall middle and in on X. declined demonstrating use trend noninterest-bearing We were saw improving the This second growing their

declines in the by and $XXX was U.S. Of We international. in in market had remained deposit most. at with the partly This note, general ratio also our contributing increase to middle a XX%. million California loan banking low offset market

very as far our data to As be low. rates, continued

point. deposit Our X increased rate basis average

billion maintain above X. continue securities book our at shown on We to Slide XX as

portfolio than was relatively years the our extends basis enough X.X rate it at it pay-downs, our shock to higher modestly at the to not purchases our expected move While above total The X.X XXX were years. yield the and of point remains securities under rates duration from duration portfolio. estimated short slightly

million. portfolio is the Finally, net XX loss a in of position relatively small unrealized

Net to Slide points X. interest net XX Turning income X.XX%. grew basis interest million the to and increased XX to margin

to loan Our margin. million portfolio XX added basis and XX points the

X by the on Interest deposits point. significant increased benefit largest at increased higher The As a expense added which nonaccrual increase the interest X reduced rate X the basis deposits with with along points loan million mentioned and X million to rates the interest I collected. margin Fed provided margin. on yields, in basis

combined We average floating and prudently rates point rates X on net continue with of the XXX had pricing. negative million $XX income. interest increased wholesale basis higher million contributed $X deliberately total, and deposit debt million impact to Increased on funding In a our margin. manage to cost rate

million million which total outlined X% million in million, end. the charge-offs loans. Total strong were $XX of included only Our comprised decrease as in loans, represented previous picture the charge-offs This on remains million. an X. nonaccrual a second a $X quarter. declined XX loans credit gross XX million Slide elevated than or basis Net which of and is overall from criticized X% our down Recoveries were less XX from includes XX quarter loans above total decrease XX XX in points This at million quarter.

for loan an credit Our losses million resulting at to allowance XXX remains steady in ratio X.XX%. of allowance

an Energy including X% total were loans billion portfolio X.X were positive at by Continued up quarter end offset potentially impacted increase energy by hurricanes. reserves, recent the in our the of in loans. trends or qualitative loans for

increased the third Slide partly at due activity the outlines will acquisitions. well level were to This and expect slightly in treasury continued to as just at We exchange. in all management, GEAR stable. fees by note, the in warrant elevated charge-offs in seasonally offset nonaccrual was Also, and loans drilling gross dividends growth high as mostly driven income, customer which the related remain quarter. borrowing year underway million fiduciary, remain quarter. Criticized growth Fall derivative to declined. with has level. annual decline difficult same Strong noninterest robust to fees expect We quarter. predict, card which a our which achieve level balances owned is and second offset charges. in fees. second in receipt income Year-to-date, other. increasing, approximately last X redeterminations a XX relative to Changes third on to foreign quarter, income an card, period was and revenue tax was non-customer insurance we each XX bank be to mainly noninterest customer-driven the decreased life track declined the brokerage was bases the we this in due Of to of stable income from preparation at had and fiduciary Up million income

As a IT skills supplement in expected. million line decreased Outside processing need call shown software expenses contract Salaries Technology Slide day expected, one also fees. including mainly Recall third for labor also benefits requirements such specialized card as there’s staff $X and increased were as higher due additional the in to up growing on quarter. and as costs, centers. equipment, with XX. to and temporary our in increased

expenses have basis, of rates and well Up our Finally charges these previous year-to-date both incentives higher declined X% higher and expense. outside initiatives in a a as well our remain With X Expenses advertising at excluding from quarter. revenue declines as down management restructuring XX%, efficiency Expenses $XX restructuring categories. decline loan GEAR X is million realized. in increase to or be of processing On the million offsetting in controlled. tied from including with charges, to and increased, we XX pricing, a deposit million almost as growth continue partly had are increases, careful million help which ratio

XX. Slide to Moving

repurchase mentioned, Ralph in XXX program. million under equity our quarter the As third we repurchased

year. includes XXX million. plan our equity gradually capital repurchases to anticipate quarter increasing up through each the XXXX repurchases We planned of Our

per quarterly our share. increased to we dividend XX% addition, In $X.XX

This a in to resulted million X During above or exercises income our the quarter, of XXX,XXX employee activity shares. $X.XX option about added per tax credit provision share.

to Ralph. back Now turn call the I’ll

Ralph Babb

Thank you, Dave.

noninterest-bearing majority illustrated demonstrated funding rates, increases our quarter, asset rate customer are lowest again loans balance this the Also, Approximately from floating as XX-day which in of sheet XX. of in Slide positioned benefit the our one LIBOR. well sensitive our to As in XX% biggest results comes tied to cost from on with among a of source our funding peers. deposits is

more drive occurred have that increases should a our than full interest year rate income. past XXXX three over the expect the year XX% We alone in increase net

added year of asset the XXXX. swaps; benefit well altered sheet bodes the thus, rate We rate XXXX December full or plus have for from our the of increases the the high potential balance not sensitivity

a which Slide an course, pace an investor LIBOR variety such betas XX. month update at balance Of and moves, the at the our outcome is depends factors conference, Last initiative, on deposit on on GEAR provided Up sheet shown we of as which movements.

We made on track and to our Up have GEAR significant achieve progress remain targets.

identified million Additionally, announced GEAR we benefit results XXXX $XXX are $XX be next of our growth, a year well include This a cost opportunities. half to initiative. as that now few as rate identified drive with result revenue for and we benefit expected revenue additional that a reduce half efficiency. run Up should as later includes we expense of of about Therefore, initiatives our have increase improve of million expect and XXXX pre-tax the full will capacity, These opportunities. completed

of With now initiatives to beyond do anticipate of end and the we million. estimate, $XXX $XXX these not total expense original added from restructuring completion XXXX. We of to expenses expect restructuring refinement our any million inception

quarter. XX, our Slide outlook on for provide the fourth Finally, we

Overall, uncertainty and of about increase fourth the quarter. National our market, Assuming average several sciences, Mortgage to third environment, the in typically reform. pipeline, technology an total and as long-term in current relative Services Banker. in be drives the increase economic to the to strong given a Services. Equity regarding tax in investment we by healthcare large such continue expect and continuation primarily loans anticipate Fund regarding increases Dealer particularly general we decline Supported a customers life Seasonality and businesses quarter corporate cautious middle X%

provide a in expectation plan Our XXXX call growth. we to year outlook for with on our earnings GDP will January. is loans that full see next pace increase our on We

at income, due As lower are as loans have do this any dealer from not national to expected yielding far to as expect including We net December repeated benefit however, The rise risk rate interest million nonaccrual usual are benefit outlook. interest which recoveries tend to to be growth, quarter profile. we third of $XX level. lower this be not into a of incorporating odds increased; loan

low. and We strong continued basis in between charge-offs to credit a to expect quality XX net result points provision XX remain and

of which increase income driven by and for is outlook card Our with fees. in GEAR treasury for offset modestly in difficult opportunities is Up income customer This fiduciary as management, noninterest expected to fees be to predict. BOLI non-customer continued is execution to a decline such

outside revenues expect As quarter. the the tied $XX expected such far which as $X tied expense expense, to to well is as about noninterest million relative of increase incurred fees. third marketing million we are card as expense Expenses to in as processing restructuring to costs mostly

for and our expense expect are we rate. savings XXXX seasonal to and the increased staff In drive solid insurance continue was also summary, returns. Up occupancy as stable We with modest growth as such performance remaining remainder in items quarter third run the our GEAR of expenses in already

ROA funds at X%. fact, was level since is In XXXX with rate Fed the over highest our the

We have as benefitted strategy. from relationship rates increased meaningfully our as well interest banking

over efficiency increased the quarter of XX% In quality helped managing Any our prospects GEAR remain be to addition, and additional have positive. Up regulatory increases, from share second drive our certainly reform are Earnings strong. XX% credit tax and the and XX%. continues per relief carefully to year. for focused We ratio third rate quarter on expenses last initiatives

enhance continue to to control positioned the believe will for further and what we value. shareholder well can future However, control are we we

will be happy questions. Now, your take to we

Operator

Instructions]. [Operator

line the ahead. Usdin Our first will go Ken of Please Jefferies. with from question come

Ralph Babb

Good morning, Ken.

Ken Usdin

Ralph. morning, Good Thanks.

you Just specialty wondering down businesses little was environment, some a of guys then was more bit seasonality bit Obviously, into little just go takes. a general the and the little lending of the if could but individual market up some a back better. seeing puts and the energy middle

but talk businesses So on you that your end change have and I any in pipeline’s you know just of across back different go demand? extend made gone build just point and policy you of slower do a people’s front, to your about see kind can lines of business? willingness their the the little how sense things

Ralph Babb

want take Curtis, you that? to do

Curtis Farmer

you year question. Banker with at Hi, trails softer with us the Yes, we our for quarter the market. Thank is Mortgage QX seasonality remaining sort typically middle Ralph. Ken. in what business for normal business little the have typically called we’ve the especially slowdown, the Dealer Finance and did businesses then a piece of strong but back summer core Fund And in to, model technology our with We specifically banking. off a out. businesses; couple new some Dave in of third sciences, Ralph of specialty saw life picks up in see as in growth the Services coming We alluded services, that. and quarter QX Equity the the growth, and environmental corporate

of Your was happened stabilize question in of the borrowing which Balances about quarter the the in of up and caused starting then quarter. the little sort a a capital are little bit reopened What the us in quarter. markets beginning in the that was part there. go bit the quarter portfolio to the to slowed latter for they up energy

actually little a period bit. so in balances down energy back And end were

So leveling we we’re off that of kind so portfolio, speak. think in to

the of optimistic. In going that terms forward, of outlook our think customers sort I more are

yet. but from in are pulling that trigger spend of not and necessarily sort them more terms hearing they I of think planning We’re the CapEx

what’s is going geopolitical cetera. issues tax think world we’re get relief, well the around going et regulatory as some with about relief, and as whether to still there concern Washington I on in

about our were still commitment our the It’s quarter. said heading that into to quarter the into remains XX% out up and pipeline cost that, there. So and heading commit there is some strong significantly. is Having

stronger a is for us positioned the and see seasonality quarter we a for the quarter. good and sort little how about of typically we’ll line business come Dealer standpoint we’re back on QX So from feel

Ken Usdin

Got it. business Thank up, a their Ralph little mentioned using deposits you too. bit follow a for that. customers that And their then in are as more

the deposit Thanks, you change when noticing very of in but you’re are you’re seeing growth, and are seeing You low So noninterest-bearing that a going? any interest-bearing? change in deposits beta, any have guys. terms those between where mix

Ralph Babb

Dave?

David Duprey

noninterest money Thanks, a out beneficial shift of of the bit shifting saw of us. as been the a for Ken. you There which some has into actually that market the is bearing

period we fluidity with a a So starting deposit see end also rebound end in saw international, we the you by the little the those are we in decline; areas latter from deposit in the but of significant balances. particular, recovered quarter to if banking, we of more average And we I if got completely see September. those saw pretty U.S. think through third where declines part time

will time it So but actual in terms the more much is direction, tell. becoming of fluid

Ken Usdin

Understood. Thank you.

Ralph Babb

Thank you.

Operator

comes next of ahead. Your O’Neill. question go Sandler line from Siefers the Please Scott with

Ralph Babb

Scott. morning, Good

Scott Siefers

quick morning. you Good wanted to Dave ask on just the question margin. a

recoveries, it is a us forward drift by margin or Can as in call rate like that go hikes other you I the can think down? sense you your hold Fed? think start absent In core X.XX for it moves give at X.XX, What’s the to direction? absent does we interest of range. words, here further additional any the sense just if would to expect somewhere ex-out come I we level the and you what

David Duprey

we and Assuming as are do to deposit hold our working indicated, that. we betas diligently

is going rate. here probably the margin run X.XX-ish forward that think I So

Now add bit. I loans adjust deposits that a in only – the that will can mix not deposits but

QX. risk is credit priced up more dealer, of to heard we the low Dealer because you from profile. of thinly move one products As in here expect the

tend again, can the other to correct. Fed an and on our base move impact the On also have But your that is margin. balances premise hand, fund

Scott Siefers

right, a just wanted Okay. that’s perfect. to second. All you. then to And jump Thank expenses for

better be I about year a charges, expected core you than the least base guys have have for core At would bit down I I been when this had ex-restructuring relative year-over-year. the full cost previously was X% the guidance quarter, think came expenses, in would expectation to what to giving for expected. the

really get just to To XQ, the So I’m would quarter the for in that magnitude a year the just hit for sense the what the ramp a specifically in expectation XQ. guidance and full up trying ex-restructuring I’m of imply more sense be? for of to substantial the charges? would fourth order get cost trying prior increase

David Duprey

continue going slight a think to into elevation to I see going QX. we’re

focus single Up into diligently so the bit GEAR on the complete much to continue work center. all projects significant related fourth cards in our will Direct a We GEAR call took way. labor that and Up to are all commercial heading so cards of that of the of debit are We That’s under now some to our exclusively could continue a our not component of our quarter. into projects temporary technology by That resulted embedded products; number all which a chip processer, XXXX. the Express, IT payment reissuance more we the cards

event, elevated will continue So cost to that bit. in be for any a

in So I on pressure of see little expenses increased just think a bit nothing much. but QX, we’ll

Scott Siefers

Okay. that’s very guys you All perfect. Thank much. right,

Ralph Babb

Thank you.

Operator

question of of line next the ahead. Bank comes Please Your with go America. Najarian Erika from

Erika Najarian

Hi. Good morning.

Ralph Babb

morning. Good

Erika Najarian

already ramp rate also to also hike fourth And into expect we we of fully for up isn’t XX% that’s efficiency well initially that So XX% Fed I the is given guidance quarter? new baked in a I wanted Scott’s out XXXX, coming beyond to that ratio do year laid full but – to And GEAR guess question, Up. you no in about your out respect landing follow quarter little what a is wanted efficiency think higher I January, just be have you bit point good in that to the a base? a fourth point I the going as in the

Ralph Babb

Dave?

David Duprey

if that interest bet the a we expect correct see loans. that slight of the and slight I What and we XX-ish. QX number, in I will in that all, nonaccrual would in was a same expense say of you’re was elevation to elevation the not efficiency Erika, do ratio fact it recovery First is those in from in level previous

'XX, it Quite Up. execution additional to some we then into slight. contributor rate ratio on GEAR to looking And biggest see will focus is continue the hikes. further So the efficiency of frankly, We’ll be the full expense reductions.

We’re the hikes. and those contribute can with going to best there’s revenue level but focusing than expense more to do ourselves rate drive that additional on our management enhancements, it nothing

Erika Najarian

pick Got follow you Comerica And quarter? it. in should as up growth also about we rate a its basis to spreads impact first continuing hike, a expect if in the XX as expect impact up, XXXX, And pricing think of of yield the a does do loan for similar we December be new to terms is compress of or in disciplined originations? point

Ralph Babb

Dave?

David Duprey

disciplined eye to pricing, the our to Erika. that on second. for we’re don’t We certainly Well, when one take ball expect always it off comes

In to a it by be terms going of the deposit is lot of other components, driven basis.

seen as previous hoping we we so my with point does projecting speculation have XX traction. But we the beta rises, certainly more for will think occur. at a begin rise. basis the occur, in I are December we’ll be point basis And is a haven’t gain rate rate deposit And that to that fact some if albeit

Erika Najarian

the But points this just of rates. quarter you XX a on higher as loan a follow-up, yield, basis Dave, on benefit saw

So in your what beta, yield assumes for XQ? loan Street of benefit exclusive the will similarly

David Duprey

shift can yield would And I similar remember on but I just On overall tad, would loan impact. agree. yes, a pure expect mix yield, that a

Erika Najarian

Perfect. Thank so much. you

Ralph Babb

you. Thank

Operator

line go Steven the Alexopoulos of from ahead. with Your Please next JPMorgan. comes question

Ralph Babb

Steve. morning, Good

Steven Alexopoulos

Fed really a your Ralph, I are we looking With NIM basis customers see the I risk is. great cost, there job think catch have XX% guys of it rates is needing to When Good low. a where to of morning up? points there’s rate the keeping done interest-bearing deposit said, expansion, where a up? hear XX the the at you but that risk look catch at And of imagine run we to aware period do you beta, – starting deposit you’re everybody. funds

Ralph Babb

catch I there standpoint. being that a to back we more done. And on say talking the be what’s what competition focused very have that and up about. from was Dave won’t would It’s stayed

you will start see as begins betas competition well. up, As up to move to move the

Steven Alexopoulos

side, then that’s the it’s loan Okay, And on helpful. interesting.

calls said, about Over few you And have the guys on talked loans market improving. quarters we quarter-over-quarter, that down optimism commit pipelines commitments to strong, getting down see better and past year-over-year. the general being middle with loan customer

growing book, with the what GDP. analyze declining? You’re loans you loans explains about As talking

clearly here. not? not doing We’re Why that

Ralph Babb

have out continued Curt, to there think to everybody point they’re finance you what’s that’s a is little this that that until get see on Washington. positioned growth the going certainty, uncertainty the more that? at making I anything we decision in growth, the on especially while they for to and well add want do not to

Curtis Farmer

California back the economy California Houston. in recently impacted the happened book growth less been with events market the into we particular Steven, by of Yes. what’s across translate a middle franchise, and in market like hurricanes our seen growth overall has more source but has that Texas for been have the in pockets of strength the in energy with us and you

and growth middle this market. market in quarter, had we quarter, even the so the in slow Texas And Michigan saw while for in California we were

The not kind sort of what Ralph first terms in of core said, our adding customers CapEx. of thing seeing would cautious are middle market of say to I a and on lot we’re

We And in the clients cases, in is lot the of of events. the that to our of seeing benefit a terms many of inuring M&A are M&A. put

terms customers for of environment. our balance a drag fortunate loan often outstandings. But sheet side We’ve liquidity who money management positive. in in hurt group. management fortunate Again, in on a hasn’t have of many been but M&A also on of wealth to remain it a pretty very been terms as does capture probably some our robust XXXX does it clients it net of in had We’re well, but more that net-net the acquiring of versus those

tended would our Fortunately, our in lines we of That’s growth. factors a years the balances that strong are have to we fourth the book of be specialty the overall third quarter. some other over impacting seasonality of we course of and why several last of a continue quarter. business. to we in sort for nice second That’s us the stronger had of business businesses one see anticipate slower the the trend quarter, And

Steven Alexopoulos

of any to lending has here? the standards tightening Curt, reduction been in loans you tied guys

Curtis Farmer

No, at not all.

staying taking focused but clients of acquisition change existing on strategy. there’s But on discipline. very and also existing standards, customer and We our no staying we’re very focused focused in our care opportunity, good credit are our new pricing on relationships

Steven Alexopoulos

color. Okay. all Thanks the for

Ralph Babb

Thank you.

Operator

Elliott with from comes the Autonomous Please question next of Geoffrey line Your ahead. Research. go

Ralph Babb

Good morning.

Geoffrey Elliott

taking the Thank question. Good for morning. you

clarification. quick a just First,

to said commit up a year-on-year indicator what growth Is that on XX%. just How How going a think it? number? good quarter-on-quarter that Can I of you do forward? bit means? number, an measure a mentioned loan you it is You detail commitments you more give

Ralph Babb

Curt?

Curtis Farmer

Yes. Geoffrey, quarter-on-quarter number. a it’s

So end where a to a versus be this client. second of end is actually quarter. commitment commit third quarter Commitments to view of would we’ve submitted

We outstanding. have firm a commitment

We’re waiting and in many fund commitment for accept finalize cases that to the client then and transaction. the

of forward track tangible so us volume as And see and going of we indicator it for the very frontend most potential a we it sort closely.

Geoffrey Elliott

the there’s in of with else, terms sciences going I big towards and technology it’s is shift which staying fund growth, at Slide at overall equity shrinking. quite gray business, then it of And looking growing balances top then guess section but And is bars, life looks loan services. like just on everything the XX the a the on

shift a in down? there Why Is there? that what’s coming there in Is other client happening demand? So is component shift strategy? a

Ralph Babb

Curt?

Curtis Farmer

Yes.

and space. bit has That’s XXXX mentioned like we’ve business a On that capital what great where venture been sciences life for has capital of more selective. lot venture sciences, technology of We capital been lines But providing call life have is there equity growth services subscription why become seeing are of in in firms the really to firms earlier, We more overall. we us was the part component and fewer and little as the investing fund money relationships more a They’re seeing great a in that like feel nice technology the got expertise. we’re and the that. we’re growth and deals.

a but more one, a lot is of competition lot of competition there’s of lot there, a the transactions. same So out – chasing competition

the very lot bit $X been $X takes business. We million, million harder a from get do so more $X I transactions, Remember, some in in the portfolio. be cases And there being it probably volume million, would the that’s think a it’s to business. parameters. little so amount of granular a growth of done of our to And are that some same deals get sort growth outside of credit

firms that trying sort working worked we’re we historically. early premier focus to to that of with around and make more true private stage So a we’ve our with capital venture stay equity really sure and

in this ebb flow. services, now is equity to business longer positioned. well more still the think So Right tends fund seeing we’re we growth and but term

Geoffrey Elliott

Great. very much. Thank you

Ralph Babb

you. Thank

Operator

Morgan of the go from comes question with line Zerbe Ken next Your Stanley. ahead. Please

Ralph Babb

Good morning, Ken.

Ken Zerbe

morning. Good

pricing. your deposits Just on obviously and question deposit a

to or X deposits on you do So you $X just have, Page that about guys higher that keep Are due that like Thanks. things looks is down able drive quarter Slide rates shrinkage deposits or might other lower? they deposit fourth X it out if look that versus of quantify are elsewhere to taking they’re to and from are much customers how want I hey, Like – now, I their you saying, billion. going track?

Ralph Babb

Dave?

David Duprey

see that historically fourth $X Ken, to growth we deposits the third up with quarter. typically all, you end here XX. September And if billion in in of moving again you in period from our deposits recall First June begin and substantial saw happen

growth to That expect continue historical has coming pattern. to probably begins quarter. to of that in just fourth out as as we to last we then quarter. And level see but the move been we first and So growth see second the in fourth a the the expect in saw quarter year, not robust in, fair

tell competition. been We reactive We��re minimis. that are very I been [Technical you aware to competition. but can’t very pricing, very of has it I do believe hasn’t Difficulty] there de

Ken Zerbe

okay. – say that you, And Got again? sorry, then

Ralph Babb

and reiterating sorry. Dave I’m what our customers. We that carefully watch I with was constantly saying. are relationships was and talking just closely very with our

Ken Zerbe

Understood.

loans Could question. interest us most this driving the else? you follow-on what’s point? remind a just Are just then or at of those recoveries the energy-related something And Okay.

David Duprey

portfolio. predominately energy It is the

Ken Zerbe

Okay. something pool that so or guidance these shrunk it else? your drive simply And is could much then the going this just – forward, of because available that has is so that loans decline

David Duprey

in you’ll It is. look they of When at coming energy, see specifically significantly. level assets, you are criticized the that down

of a So, pool. the yes, it’s decline

Ken Zerbe

Great.

much. you Thank Okay. very

Ralph Babb

you. Thank

Operator

Please line comes ahead. with question next the Bank. from of Dave Rochester Your Deutsche go

Ralph Babb

Good morning, Dave.

Dave Rochester

outlook Good if the that be thoughts do using think next wondering are customers be just year. Was or there growth to challenging for that expect Any more great. on appreciated if might I to deposits? guys. growth growth loan by morning, the would if you be funded you deposit

Ralph Babb

Dave?

David Duprey

XX%. more hard beginning remember their is ratio deposit our we’re But to predict. excess customers Deposit see to growth at liquidity is to loan use businesses. that today of in Again,

So in if level able to we ready, capacity, have excess loan willing a put growth. considerable of and

good the and So It will opportunity. to ability we have a borrow well. have be as also to we problem await

Dave Rochester

just Okay, great. quick. to switching expenses And real

comments investments limit that out the that be up XXXX could see As you low on Just or your next takeouts, hinting creep takeouts range? that are growth enough trajectory here year cost are guys with look would on could you guys making, any to rate to just there great. and thinking growth to you above you you’re those cost be color single-digit that actually the substantial

David Duprey

forecasting we into it Up into $XX do Well, the expense terms want much forecast Up reduction and committed process save. while million indicated in to January, expense GEAR our detail that of that And GEAR completely of to for don’t if really in $XX completing recall an in get incremental XXXX. has here as you incremental million our I XXXX, achieving we’ll are Ralph built

Dave Rochester

the higher by this positive And investments that or other at expenses category the get year? growth drive next expense to all into up year does versus eaten

David Duprey

as even you that we that Well, increases with processing. year-to-date outside down have call eat it will we’re into in items million because $XX

and impacts merit balance the controlled. would of but remain We that we to inflationary have there’s to will no trajectory expense expect doubt, very increases, of very impacts inflationary on muted occupancy

Dave Rochester

right. All Thanks, Great. guys.

Ralph Babb

Thank you.

Operator

Jaffray. comes go of Piper Brett next Rabatin ahead. the from Please with line Your question

Brett Rabatin

morning. Good Hi.

Ralph Babb

Brett. morning, Good

Brett Rabatin

be Wanted might that? regulatory a you on your view the then the ask, environment cost capital ratio payout regulation, being And you it about with a improving to total well? about from just how aggressive for upper can little of your early, potentially your thoughts and with talk but hopefully see bounds thinking operations as more less just

Ralph Babb

to are there in anything our look and capital that forward, that history especially in right of our on CCAR I happens lot you on us standpoint you that discussions top shareholders be you discussions to Dave, see lot going I and think want on know ability And Washington. now and if would forward. a of fairly we’ve would aggressive think returning manage been add potentially I process always the back it regulatory at our one that to if I to capital. impact hope going in from priorities going a that. and today they traction move the get a

David Duprey

No.

I extent well think downward if to as certainly on levels all the increasing the remains in to capital as very being submission it’s driving fair challenging possible of assume we’re our level to on same, very of that looking CCAR year focused coming even focused working and capital at being dividend. our the this

Brett Rabatin

the aggressive the more with ratio just dividend then thoughts incrementally might be side? the buyback much on that. Any Okay. a on or on either up And you payout follow how

David Duprey

position make can the I to right of of right taken shareholders. historically, reasons balance the And why I sure what on not we’re described think we way this the the it look to thing I a from at That you and one changed, we that did. did our have We see was the returning at before standpoint point. capital do environment of the

Brett Rabatin

much. Okay, great. Fair Thank so enough. you

Ralph Babb

you. Thank

Operator

line with Please Evercore Your ahead. next Pancari the of from ISI. question comes go John

Ralph Babb

Good morning.

John Pancari

declines that what color when we’re loan you getting are level, to look balances peer quarter. the year-over-year balances factors the can uncertainty the for seeing GDP confidence the weighed all? on level obviously and banks the you gives at that that you But it the What GDP apprehension macro basis. given a Good of morning. the in in to that Back I not DC. to the on get appreciate comes growth there topic, gave first Other the you’re you when around well as to citing us

well. little as it a bit loan peers. through we’re seeing they’re citing growth So faster your But

gives that anything So you that you your initiative Thanks. can confidence and you’re Up making investments the And that I’m GDP. ultimately? separately, GDP to the then just can accelerate with long-term franchise GEAR in is wondering beyond there get what growth

Ralph Babb

Curt, want do to take you that?

Curtis Farmer

to in some certainly that the bank have. think There’s of is we perspective Yes. important in. keep sort about John, that this when you for growth of portfolio not we’re lending our businesses

the in not indirect space. lending We’re auto

sort been commercial base months last asset bank. clients, really there core larger caution of the are relatively think big are a C&I over you not when our in with we’ve of us We portfolios a We’re XX And to for that been of sort has XX, lender. just the sort course addition a the of design. about by couple flat

our right And get for which of thing so about concentration us. have down sort to portfolio lower a X% to was managed the do now interview portfolio we

hurt in bit has our estate that we’ve down commercial holding come little in a secondarily, growth years, then has while few a for had we that as so more And nice overall. real increase losses in, stable growth our we’re because portfolio been in we concern right now but cycle are just where et of multifamily, we’re sort the CRE, seeing environment the not with of the in especially stage in that cetera. about any And

a across that got some opportunities lines business, and couple growth realistic there, fourth are you a When goal. what and sort of out for GDP commitments our you kind and of for to the going is you we growth quarter think been us do about so overall. portfolios, portfolios the commit of seasonality then of in mentioned traditionally that right had rest When think of example, for business flattish of forward, dealer the expect more the would the us and see And I specialty to in business I kind look the the now. of engines earlier

than around us GEAR above for primarily in we’re take certainly prior very will to. of really overall. Texas, underwriting sort we something more take our that office experience. the redesign both GDP more California doing than to profile spend our with risk some and the standpoint which of GDP some our overall for And sales staying three have process, the is and is through at to Up sort that right the an credit we really businesses good growing just how a and in that of us. centralize advisor and technology bode to that Michigan be not that of We’re all may perspective our all for that faster and team digital think about or how on markets; the sort is governance and capacity are grow calls national or businesses there part some over from that work a the credit time to which we we specialty clients creating of improve time mentioned GDP leverage We our of of seen simplify with faster customer aspire as have really more through We Indian functions idea call of level. back looking we sales do at Growing will them approach slower line well of

we’ll rollout benefits XXXX final in of that terms start the some the nearing of and beyond. the seeing initiative and of of really completion We’re in

John Pancari

Okay. have quarter? the the And utilization – on and line you to that then for quarter do you. how that number compared Thank last

Curtis Farmer

to tends was quarter. So the ebb XX.X% the in flow. It bit. line utilization and little second a decreased XX% and It

John Pancari

just growing income GEAR lastly, don’t single about income? Then Thanks. noninterest how you here to right. Is non-customer very that there guidance the low annualized overall when there. out some I’m a factor offsets the trying But fair in the I you for but know from also specific related Up, all pace have digit of income. you further on side, Okay, noninterest think think

David Duprey

overall GEAR to again, we XXXX initiative to our next previously push back that 'XX. color had the the X% we noninterest for income million XX our within where still full XXXX. X% that January in I XX we Up of Remember And close in to year. of the expectations million come in more are be from looking terms balance for to communicated year will was we it that when range expect For think out

John Pancari

Okay. Thanks, Dave.

Ralph Babb

Thank you.

Operator

Your Moss with ahead. next go question Please FBR. comes from the Steve of line

Ralph Babb

morning, Good Steve.

Stephen Moss

loans, regard energy, criticized commercial have loans to Good I they been morning. real quarter-over-quarter. estate the credit front increased was noticed criticized I also your that wondering with on actually And excluding increasing.

color you wondering there. Just give if could some

Ralph Babb

Dave?

David Duprey

not been really that’s a performing call portfolio really. bouncing terms Yes. We’ve Ex-energy, what the level loans. on been we of at has bottom in criticized around sustainable the our

problems, have ex-energy, can noticeable a look here at So seen basis outside have and small growing, in all. increase and an impact credit any percentage increases they’re energy on there not but we of portfolio like the

Stephen Moss

Okay.

David Duprey

a was fairly here. Specifically, got example an couple mentioned, moved that quickly by real criticized. One just going a in commercial impacted estate we Steve, we be the there had addressed on of other one to good you Houston flooding entitlement and to it’s deals that we issue feel

an what’s real estate. we’re cases, commercial on So being going that in not of with about concerned both indicator

Stephen Moss

what also And is the point? reserve this helpful. loans that’s for Okay, energy at

David Duprey

I for that coming that room in in quarters. We though more down and to expect allocation the is future we come energy this tell you that see there’s if didn’t improvement it it quarter. we continue portfolio down can disclose to our

Stephen Moss

Thank you very much.

Ralph Babb

Thank you.

Operator

of Wedbush line go Please with from the come question Securities. will Peter ahead. next Winter Your

Ralph Babb

Good Peter. morning,

Peter Winter

takes and somewhat was quarter to the just hurricanes as rebuilding impacted money would Good at of see I’m And quarter? fourth this maybe the curious, a morning. you place? rebound loan growth expect all from insurance in effort the

Ralph Babb

Curt?

Curtis Farmer

would drag I the contained the us for not loan the that growth at pretty hurricane on It’s Peter, significant for a quarter. Yes. Houston situation market. was say

wealth inventory, have that the we reinvestment repairing bank facilities, lending. probably opportunity in and traditional we some clients versus more next as term look is us operations in believe couple our traditional market there’s the the of Houston that many do business C&I of marketplace business et the and for longer at in management look quarters or occurs a as cetera. We Florida, While out that reestablishing

And attuned to so might and that be opportunities that exist. we’ll

Peter Winter

reason and I increase quarter having you But And just fee it’s at limited, is XQ But ask look the look of growth up. last you’re follow growth from? If fairly reported the it I year-over-year if had where if is driven. a has Okay. kind the a flattish. income granted sequentially, in fee is of Thanks. Because the nice from the XXXX, customer pressure the And and at – the first XQ, quick basically at I year. and been that after income nice XQ coming look I to flat.

Ralph Babb

Dave?

David Duprey

up while see we expect where this focus. last very million predict. it to nine much very in if in in continue foreign up of had year which significant in second warrant be has some that not terms it versus Candidly, for driver elements believe banking, other difficult you for million the is customer attributing fees, nice and nine the some a have have quarter, year, overall. to third fact we’re that we’re the our XX Well, really substantially specifically quite the the quarters robust, of flow. income Up last to to year we us, limited quarter. of we not here in the and Investment The expecting recognition, although much of months limited a had XX we couple Derivatives this didn’t again very we to really were look ebb impact can driven where really quarter, a of income non-customer are months I quarter the fourth of impact. that GEAR

in of a very was began of again, that we’re much rate predict. activity December the certainly of rise the rise by very, that increasingly surge probability swaps. the probable, in lot Candidly, June to customer in a But a if to with think dramatically, one to see hoping customers driven rate I fact lock we difficult December. became see more

Peter Winter

Okay. Thanks.

Ralph Babb

you. Thank

Operator

from will of line come ahead. Tenner go with Please Your final D.A. the question Gary Davidson.

Ralph Babb

Good morning, Gary.

Gary Tenner

Texas? Obviously terms I velocity you ask transactions I what certainly that the real about morning. southern your talk you’ve think estate of permanent to about Good California maybe commercial Can sequentially real attributed market. financing lower the wanted seen comparing to into particularly some you markets, and estate. moving Thanks. of to loans in commercial in

Ralph Babb

Curt?

Curtis Farmer

a certainly CRE new lot of Yes, commercial I still We market looks real at overall. opportunities. getting remains estate robust think are the

growth seeing outstanding our of the California new focused market As balances you’re and market. doing and probably and business are to in both reason relatively suburban footprint in California is fair of you multifamily strong in in markets is and a northern the southern still not know, permanent of California. in quickly while in actual that a The urban Texas amount is it’s moving the we’re primarily and sort we lot more still. originations, that

of so equity remains And in a a the cities. permanent Texas robust. two deals looking little we and markets of of locations the is in a well priced, still are that But they’re bit structured, like. the deal the we’re they frontend on they’re have at tale well lot

with robust for a are at so new of worked lot little phase. we’re period Metroplex, the remains part time. a you a market with of and looks lot And still long if state DFW at look look a of developers a at northern in opportunities we’ve the the transactions and booking seeing pause of that Houston bit still new and remains

new state. not in of portfolio also at the credit so originations more the for to of of not the have will we’re a eventually now. right is change And lot that We time speak, lot of opportunity have, there but least the with seen deterioration the seeing a we part northern being that but

so across we the robust more of with view limited versus California bit just is footprint. have geographic more a entire that to work sort little a it’s And which

Gary Tenner

over last multifamily on kind terms the yields Thanks market, of for respect the new that. quarter with and in quarter, And California the to in changes of any segment? production a half

Ralph Babb

None.

Gary Tenner

All you. No, okay. right, thank

Ralph Babb

you. Thank

Operator

over Babb, remarks. And CEO, I’ll now Ralph turn and back conference Chairman for the to closing

Ralph Babb

on everybody’s morning. and We this the appreciate call being interest

went again with in Comerica. in interest and We’re have Thanks your beginning a after you very good the that. all well sorry for the disruption hope system hope it the And day. for

Operator

Ladies gentlemen, conference. today's joining. Thank this you all for concludes and

You may disconnect. now

Comerica (CMA) 17 Oct 172017 Q3 Earnings call transcript