CMA - Earnings call transcript Q4 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 Fourth 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

on be Thank you, Curtis Chief XXXX Participating Credit quarter to Farmer; Comerica’s call Regina. Good Dave Guilfoile. morning earnings and Chief Financial Officer, conference Duprey; Babb; Pete Chairman, Ralph our welcome Officer, fourth this President, will and call.

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

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

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

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

Ralph Babb

million quarter earnings was share. quarter per of compares stock restructuring from as to and to deferred adjusted $X.XX $XXX law and that per $X.XX morning a charges the increase. diluted or interest adjusted to year employee income benefits well for a This outlined employee call. to share, X, compared common Today the per of bonus, largest that $X.XX Full you $X.XX or $XXX of have transactions. XXXX of a included item XXXX slide Thank Recall assets. On of recoveries one-time $X.XX tax income impacted Adjusted Good a fourth we impact or net tax per or added reported a deferred million tax new joining net related share, quarter million $X.XX to we $XXX items write-off million million $XXX third the increased adjusted adjustment net tax $XXX elevated share XX% share. excluding third net to the per our our results. which is The income results per as share. common certain and

which increase X overview results, full interest net to income manage and higher interest loan grew rate we as in an our of benefited year a including revenue deposit Turning from XX% slide XX% pricing. and prudently

execution increase addition, successful of Europe X% X%. fee and income lowered our initiative helped expenses In over

cycle We returns and pre-tax credit XX% ratio an ROE quality higher continue to of increase and efficiency and adjusted of navigate substantially the Altogether an anXX% income ROA remained in an drove and adjusted XX%. this energy X.X%, strong. with of

was average were capital national growth however, As and acquisitions. as far corporate were to The decline banking needs banking. private for excess dealer cyclical a offset more banker, most loan and X%, grew interest than deposits. working bearing The services, increases in notable energy increased mortgage loans $XXX and in Non-interest declines million. excluding primarily liquidity deposits bearing decrease by using their in customers due

of fourth or third billion, strong and to XXXX. reflects over $XXX results; quarter. an under Through program. our in repurchased in well Our took X.X our quarter LCR $XX.X loans light repurchase XXXX X%, This Slide million equity average solid financial quarter our increase increase a the million of dividends, buyback returned and $XXX to capital shares strategic summarizes our we XX% the We shareholders, X deliberate approach performance. pricing as position million relationship the fourth actions for were we as compared to rules.

in As a in drove dealer mortgage expected, and an national banker seasonality increase finance. decline services

a line banking the is growth seasonal increased also technology our sciences. life and bearing pattern. with $X.X deposits, billion with Average deposits We which and normal growth in in coming of majority had corporate from non-interest

monitor December the rate the to deposit select We standard closely and base. this In adjustments continue time we conjunction our first rates minor to products. with for made on cycle, increase

metrics in XXX bonus working $X,XXX one-time granted our shareholders employees. after our As our higher gaining hard increased I expenses with which gradually team. interest we expect year. the with conjunction And income buyback interest due expect repurchased were we’ll increases $XXX X.X reform turn which will $XX gear-up excluding hour, included $XX In up charge-offs. basis with per a colleagues interest points We of detail. XX the now, third as who distributing growth. every – the revenue mentioned grew decrease net and with over quarter rates million increase primarily over benefits million increase And X% minimum Non-interest a wage XXXX to We recoveries, increased the go we elevated remained almost initiative. impacted our or to stock as and pay to in to raised in shares remainder we million to to are CCAR stock of million income net the our $XX are Dave, of loan interest progress yet recoveries our Credit over the controlled. we tax growth, more gradually with bill, the traction were with our some we the the we reflecting quarter category well strong call

Dave Duprey

Thanks everyone. morning Ralph. Good

quarter. Turning to quarter increased to loans X, XXX third slide fourth average million compared the

inventory increased as Our of models. auto with the dealer portfolio dealers delivery XXXX rebuild floor plan

are quarter our consolidate multi-franchise the national key had be with across Corporate our larger, also strong of tend to business many and growth relationships. to importers. a which sector lending lines. large specialty of continues customers saw and dealers addition, In several expansion We

growth, general life to structure continued a M&A customers and private pricing deleveraging environment. middle (inaudible) planned competitive a fund mortgage robust. customer’s continue in equity an as for as period Total labor market services impacted to $X markets loans stable activity, disciplined and loans equity growth in markets decreased due technology activity, winter and of and grow aspirations. X% the billion We decline were formation or a example, and by fund above the due capital commodity our with total comp For of capital exits, sciences, remains trade result to remain impacting increase venture specifically prices. pickup with average a Average loans sales. quarter. Seasonality in expected to banker of highly firmer energy slow-down normal end but as

to XX basis recover recoveries. quarter. Our interest million excluding loan points interest million, X see points third the million X the the higher a full we and fourth yield quarter, X million expect in to increase to rates aside, non-accrual rate basis compared In December increased in cutting X of first quarter, benefit Typically we the X recoveries yields totaled our quarter. the that added to

dynamics loan portfolio. other points included added X the partly addition, In shift was in fees, that basis the which by elevated mix offset

was on Our to were seasonality. a CDs. been over usage. with Non-interest the time by loan so, nearly line The deposits the million. X X. but million and fourth Customer improved X% billion remained of volume low relative accounts partly the have in XX%. note, our quarter. based, at up decline line offset Average every yet seen ratio over increase increases broad and over XXX loan-to-deposit with has deposits sentiments and market growth past has money business is increased bearing signs as typical in shown supplies slide line we not significant This in increased quarter solid price as of in third in nearly or remains month XXX or Of

far deposit to this as product as minor we market classes a rates, mentioned, in pricing. monitor the We do made on our standard to market. in As fourth on for product deposit competition and our managing continue well rates remained as each quarter very and focused prudently as basis, we adjustments Ralph certain closely late base

continues low. the quarter. just increased average (EBITDA) fourth rate to basis Our in be The points X deposit

our We and deposits total customers, and model objective is managing competitive and to retain needs to our understand on while price our offer products. appropriately our Our stay relationship attract and cost. close rely

on and portfolio. slightly portfolio short total our been points book securities increase relatively billion in a for modest slide XXX at Recent a XX purchases at under Our shot rates resulting yields as at duration The expected under shown downs, the estimated have the X. modestly remains remains duration pay basis higher in about years. extends of and about the X.X X.X rate years to security

million. XXX unrealized portfolios loss position the Finally, is

the slide XX, income net were stable. to and net interest interest Turning margin

recoveries. the we quarter As included third elevated mentioned interest

Loan margin. or $XX X other added X decrease points. income X Excluding recoveries, contributed dynamics increased basis one $XX rates basis increased points. basis total, X net In interest and million increased or net million X million million to added million points interest the a the margin and in growth

basis or margin. level Finally a of X points million lower added to wholesale the funding X

Our which strong X% than points XX. overall less This XXX were loans a $XX includes XX credit criticized represented as of picture outlined on decrease quarter comprised less Net million XX or non-accrual remained loans X% at Total of charge-offs end. million. basis and million decline loans. total in slide loans our than total

as energy fourth charge-offs the as criticized loans, well far decreased as loans all As balances, total in non-accruals quarter. and

days on non-interest charges by drilling Up have expect this activity redeterminations due fewer categories. borrowing due in acquisitions. were mainly business to nearly will strong remain XX growth level. a Service increased XX in X track outlines in complete was accounts approximately achieve Fall X% or income on which all loan almost currencies. This quarter. million with increased bases our balances remain charges. at to the and We to Slide GEAR and continued We slightly, growth million revenue three declined led deposit

performance the bonus income and non-interest related slide increased XX and million with growth announced, card, revenue Salaries well a with to rose processing exchange. Also outside the benefits shown one-time increased previously For XX. fiduciary, treasury that compensation. in year, expenses foreign line to year million of including reform as on as growing in XXXX approximately growth management, increase employees, tax brokerage as full fees. XX and we related card relative In bonuses increased reflecting last conjunction

increase be efficiency to costs as well tied Finally, down advertising and decreased. the offsetting most this Expenses in well were X% GEAR careful including a of was is processing equipment ratio XX% and increase growth pricing, Expenses from Ona deposit rates higher revenue X Results outside our XX restructuring to and continue incentives million, XX basis, expense. loan higher increased are charges, controlled. which over or realized. an from $XX our expenses initiatives software in have Up year categories. as million with of as declines remained restructuring including in quarter. management third full million charges technology excluding million Partly

during we quarter program. returned fourth Moving to Ralph the a or slide stock Together XXX share. This warrant shares. of XXX,XXX dividends X.X with As the resulted about to XX, X million shareholders. under $X.XX our Of or to our shares million repurchase employees repurchased equity exercises income in note, credit and mentioned fourth million activity we activity XXX million tax added in provision per quarter about

Our loans the We’ve majority are full fully to Rate asset sheet drove on the from asset million in deposits, our in net in source income. balance balance of non-interest day biggest among customer XXX our now sheet. illustrated be cost continues XX bearing XX% of from slide our lowest well peers. increase XX. year results ready interest as comes with benefit to sensitivity positioned our a to rates, funding our XXXX tied of Approximately LIBOR. XX% one sensitive Also altered or alone earnings increases increases of which

rise. full very currently Thus although million has Our we of begin be XXX million. remained benefit XXX we rate a the year well, to it XXXX anticipate estimate to deposit data to XXXX will increases

at course deposit depends variety outcome moves, betas, movements. sheet and pace Of of a balance as the such factors LIBOR the on which

at we add wages some did past. addition, in In as regularly point will the we

to liability (inaudible). balance movements appropriate our other sheet asset assess given Our continues position committee our path the in to the determine

will call back the through outlook you for our to I XXXX. Ralph Now to take tur

Ralph Babb

Dave. you Thank

growth. year-end the rate line of of GEAR on total, environment. based XXXX. the expected is yield expect In and GDP It outlook also million in execution current our economic $XXX to to continuation with we in includes increase which initiative, average the interest by usual As benefits loans is Up our

mortgage We most expect and particularly well businesses by technology services market California in loan and national as life as Texas, lead middle and in sciences, growth dealer banker.

We of of book. current it expect banking competitive be stable as size Corporate the to should the is maintain energy our segments. most one

the our economic regulatory Overall, remains credit We closely loan reform, as watch growth. positive focus will progress well tax signs is maintain for and given our more discipline. relationship Washington of has as stronger customer on we pricing cautious but as sentiment and made

income any we to Dave year funding. benefit expect outlook, million and our our $XX interest a expect indicates net charge-offs this XX overall million Of of increases. also remain to our XXX to XXXX further are do increases result and XXX Loan independent in recoveries contribute between not rate net provision which as low. performance about as related expected points from We rate to full expect well XXXX were a basis not of positioned, from interest is the continued elevated be repeated. and increase is million. With XX strong I non-accrual while , we to included portfolio, And the we level note, model mentioned this net of growth

of are in they expected pace to the deferred drive asset increase growth continued help management. Up returns year-over-year, and to are increase expect believe X% GEAR card, brokerage excluding in income non-interest initiatives fiduciary, and of predict. $XX to difficult will million execution treasury expenses a of continue Non-interest revenue X%. our as result particularly growth comp We We of

$XX inflationary staff from are derived expected well processing pressure insurance with savings such card to be as as to items more million. offset and Up consistent This son is expected growing be than merit, revenue as above expense Additional increased marketing. annual with GEAR outside

certain be expenses share the $XX In million $XX that and includes relative million addition, project compensation expected optimize to $XX meet will salaries expenses to the Restructuring customer infrastructure. annual to to due as rise Recall continue quarter million incurred XXXX, approximately are to benefits in new to demands our our presented higher cost, income technology, no expense XXXX. associated in expense. to this bottom million continue elevated invest be first whereby and Of and was on of adopted approximately $XXX recognition This for products of our change will standard note, net payroll in has January taxes. included not totaling effective we revenue income line. effectively X, lowering and XXXX a presentation non-interest of outlook impact non-interest

improve efficiency points. will basis approximately it to by our ratio XXX XXX However,

reduction tax slightly meaningfully certain under taxes increased. elimination new made rate. from the law benefit investments significant tax as Finally, is credit deductions tax in and we effective XXXX. tax and our statutory approximately rate the than includes our our expect relationship and state lower of rate it under and the of from to a strategy higher pricing XX%. forward progress federal In interest the proven closing, This a banking benefited in We rates deposit Comerica and advantage a loan reflects as

strong. in XX%. in drive execution our Europe expenses. a income addition, resulted helped In successful This help initiative and remained reduction returns fee increase credit metrics significant our of and our a to ratio in The efficiency drive

should returning further our initiatives, enhancing capital full and excess As investors. we year growth. further implementation look increases, impact Up remain we to ahead, Also continued by well rate additional from growing tax relationships, forward changes of revenue XXXX economic growth. focused in rate positioned to on benefit the are expect our and we help The and shareholder drive to regulation of favorable GEAR lower the year we value advantage take rate increases to of

any we Now might take to have. questions will you happy

Operator

Please with our go line Peter Instructions] from the ahead. of Securities. will first Winter [Operator WedBush question come

Peter Winter

reforms; benefit for I the you loans? your delay in was cash from that increase need the borrowers flows the just bank curious, do as tax as well would their think

Ralph Babb

how much up. how to picks to you depends have I the fast will effect. add think We’ll an want and Curt, to that. it have see it economy

Curtis Farmer

terms economy very impact longer the it think net need. an for with you’re right Ralph, we we it work so But that businesses of term I positive. and the I term, short for large (inaudible) in see think I it’s borrowing positive lessening the in at country should think have the and and the

Peter Winter

right you when rate time, do analysis you walk Can through that the that interest the is just hedges?

Ralph Babb

to want Dave? that you Do take

Dave Duprey

at weekly closely. we’ll look a very recent the on basis monitor specifically that we [Feb] commentary. candidly, that Peter Obviously given

We’ll slots, if Today years you rate can’t four exactly looking last today, but the other all well. the late slots, back have week to slop think looking in was I used at strategies ago. that year go we reintroduce isn’t potentially and that that attractive to give straight We typically I four us, be price years it XXs.

a in in are not for So it. period, you four anticipating year XX but terms pick that we rises looking in coming are three fact the or that’s XX attractive, but locking in then rate going XX how It’s that to if up or all basis you’re only at points, year. of

Operator

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

Brett Rabatin

ask, happening, but for to expenses know first and more in that changes regulatory thinking pretty how your with and potentially then seem a big about talk would yet, does just we’re XXXX can it capital, opportunity be to you’d Wanted in like are the you have I factor there aggressive not guidance capital. to that all about just,

Ralph Babb

manage at I forward on When things expenses would we as designation. us opportunities at the there of would that the capital growth an an our not appropriate institution, earnings expecting. point our based there at size we’re position on that able is well especially this important level overtime, effect regulatory most that from look as are specific being and to say is to be to out relief

Brett Rabatin

you be your increase I to change outlook in from from that there might GDP, back continuing than loan for what partially utilization of to loan to pay-offs kind this function of loan be for know offset aside obvious would looking clients. to growth GDP the a better or is being factors the wanted and what year? know about you’re to flattish equivalent go I talked - energy, some time Just for growth that change

Curtis Farmer

GDP, think when as when call, that are I markets on the kind very and prior us, we said mean potentially managing not businesses in, to is GDP of you that of that we slightly returns our measure a the risk compilation than that but all have we approach prudent does a you as appropriate that to look we’ve at not that’s good businesses would earnings the shareholders. faster across the would that think well portfolio, grow managing of at we for look serve, kind as average

concerned, take our As far is frankly opportunities for but we of are going we the and in care to new to seeing clients, released quite that energy what we’re portfolio business as the like portfolio. pay-offs continue the are matching there

And anticipate that so relatively we will that XXXX. flat portfolio remain for

Operator

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

Steve Alexopoulos

Ralph, the I reduction most that guidance the at am at tax significant fall rate effective benefit just looking you this least at the line? to looking XXXX, the year expect to bottom for in that of in correctly

Ralph Babb

fair deal the technology current investments, to know continue of great we’re do as And with changes additional the GEAR We fall in the are to to benefit that technology. Up, thing side there. we reinvesting all of bottom of been as but remember and on midst would and we’ve amount the product line. stay know you will especially in a a rapid the expect There we today be appropriate because will especially through the going

Steve Alexopoulos

point, is use this if of pace how getting you of worse, Ralph term? loan you at the the what’s the There beyond up do XXXX think competition talk longer your this capacity you view SKUs, investment. step and of

Ralph Babb

continue have and if get Longer economy mentioned term GEAR will think as Up well, to is, to services reinvest to based competitive. and time we and of on be and begin at be to be I the on up, and that basically the to tools I that capacity where to were so it it today, be used growing need be we the that same the have we and to kinds would need products

Steve Alexopoulos

terms that changed you question year for Give late of we deposits expect us for about regarding actions increase what in quarter. an in ’XX? XQ the the Maybe and you the pricing one should separate it on you just this Dave, coming on talked some the took color there

Dave Duprey

over, market of adjustments regards on analysis at on looking to real then retail and down And retail And again deep positive premium balances (inaudible) we over basis for larger the that the deep that we couple made money side, competition last down basis we the or as increased over circle. market where XX years, real customers increased larger points. were XX at XX a prefer our And as to by we with a large million a at did our XXX,XXX our (inaudible) and balances which more segment, planned we for business points. looking money define by We defined for and as analysis of region.

Operator

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

Geoffrey Elliot

ticked X again think that [CET] to for change a how level is quarter, if back talk capital, Maybe lower about about this now you ratio little it how it are Can you the capital, the up you you and is lose XX.X%. [specific] designation. bit does optimal XX.X,

Ralph Babb

buyback. think and We shareholders talked for but important of I is about will numbers. being not to going looking manage in forward is capital to with higher dividends our think there dividend and the list your target more say able I us today these to one things would question, and to in become through that have on return be a is and or capital I either managing the ability you’re little the capital, And that where the active hopefully a

Geoffrey Elliot

macro could payout terms of going that environment think you type that if more the you range something you reasonable? achieve seen is some be couple to in be banks regulatory total think go of we’ve the that of in could XXX% active, environment in you’re of kind a this this And to

Ralph Babb

on effectively about depending which the that will so position. we capital can think growth earlier begin that’s you to there overall their paybacks see that talking were out institutions think manage I grow, I

Operator

ahead. go question next Jefferies. Your Usdin from comes line the Please of with Ken

Ken Usdin

higher you from us And Just positive NII in rate beta. increases us that you appreciate benefit December rates the on forward XX%-XX% side, model the on to sensitivity, the understand And what’s obviously a give basis using can that points standard for with the color model. betas you’re hike, core on rates slide. higher a but you’re XXX the you see that starting just point, building or I us now for your have wondering you the follow-up gave help the on

Dave Duprey

If I on correctly, the analysis recall wired believe beta. again I that’s that that a is (inaudible), on focused in standard very but XX% beta

Ken Usdin

XX% are still your cash base? it is had the a as about the you What to you wait can still getting ready versus on is customer amongst your terms in touched little would deposit base loan terms and you seeing bringing good about you a growth. up of platform of really just people and customers prior deposits to customer business the bit. you side, from just invest, in growth core. mention how question And loan I kind another people’s you deposit across in did growth between see, still that flows, But the it of rates characterize knew balance talk

Dave Duprey

I in remarks, contingency As the prepared mentioned payment. de-lever some customers we

at point that yet do have put them pressure still may a equilibrium, confidence have find terms not think we’re liquidity. I growth but of level of customers because entire I that some of I a the see record of of cash some the quite levels We to does and majority vast level bit (inaudible). expect until think of maintain continue historically, that have point frankly do we loan that and And who our seeing of they in

as including economy in confidence there think positive tax signs, are certainly I the continued and reforms. grows signs, positive

I begin cash can and those on capital they that begin (inaudible) so think our that side encourage to is lines utilize the to on begin down therefore draw credit. the customers hope (inaudible) of that commitments our to to will lines

Ken Usdin

geography, customer a like Dave or to there where sense And conversation place? use their would getting is start last that if where you that as tone the base feel certain the that might you or would is bucket one, business

Ralph Babb

on (inaudible) to want you do that? Curt

Curtis Farmer

said a earlier, have all we geographies, the etcetera to with of the but specialty our seasonality. services, Texas natural to GDP. at When We of would little couple deposit you to but life for would standpoint, a well. just quarter caveat geographic just we Michigan business glad Yeah, in finance see first, latter number mortgage across also include finance, being year also some to our small cyclicality a with for perspective growth led general expectations, cycle XXXX, the and of again look with market I to geographies continue and really bit I bank. make normal the have sort major growth I’ll growth a line a number from to And the comments the as technology well. the look a And sort But of business three (inaudible) middle softer banker our by expectations a on would as our in as but of line from tends of growth lines, and business economy we businesses a Ralph. XXXX be at mortgage related California, banker us we loan first expecting is, sciences, environmental of business dealer full growth or be that in

Operator

Demba next line Suntrust. Your the of with question comes from Jennifer

Jennifer Demba

we How is on of this $XX earnings see couple from may in and thoughts impacted, away banks tax term, larger longer M&A excess next more goes designation the levels. to maybe some maybe billion the asset years term $XX of billion as reform M&A SIFI and the near then

Ralph Babb

make any last that in the were at markets opportunity focused and lot to and we’re right come judgement also and Texas. of the when and up specifically growing have we’ve grow in our in we some whether that to at XX acquisitions over certainly alternative add in And are an as that both years acquisitions. appropriate California markets, footprint very to in but we at especially footprint, looking fastest because to look up, two always the but We there, we the very of and But our opportunities footprint they look fit expand culture. accelerate to a would as happy the done country they came the would growth with

Operator

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

Steve Moss

I hike June both, here was your thoughts to get March or if we in in or and to what wondering NII? the are impact set would be what

Dave Duprey

if coming Steve just and data where real we use million we from slide million it the level looked think shot, And sending December, a weeks at in beyond XX that projected not have we’ve that. March, of in If you XX remains At that as (inaudible) you if a that’s think XX slide to not XX December want sense significant seeing amount of to we adjustments in time XX I we’re if of the a we is or seeing have assign, pressure we’re can to I whatever we’ll about. to beta closer far rate get talked two you the better a to (inaudible) of those that at. are I because and assign think March on point rise, and this use to beta residual in whether in couple kind XX, the comes XX we’ve that made from XX. of AAA high take you to a recognized spend want have

Steve Moss

here? that with is impact fees, sustainable question is And seasonal that’s to regard or Okay, more helpful. second a that of here then card

Curtis Farmer

in One sales of activity so terms in would been that did was agreements the an and new bank merchant our lines programs third opportunities with of on things clients a to commercial so from retail business looking upward business, include here do upward NII well. cards, other entered feel Steve all traditional and got we two then these of we across we’ve the card as our trajectory have the we party for cards for of traditional some place, we programs of and card us like ago that some at a And with business clients we’ve government have just perspective. trajectory years in

Operator

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

John Pancari

quarter ’XX linked digit terms if outlook? of what here do then from can on quarters? hike in of the basis to could the revenue. the coming bit expectation assuming we past the the terms hike just to the margin, the you you the What’s I spread – December little color expansion in of margin? benefit Could for through some get separately, of see terms follow-through in In of give And margin NII a the gave hikes want rate modest Thanks. low a know the your assuming around single us

Dave Duprey

business that funding in will the level and significant point items of out also elevated margin of overnight impact quarter not that but And with (inaudible) obviously us an we overnight going two said. and a the we are ’XX we’ll that fourth could as continued (inaudible) positives level albeit that in recoveries fee which I the in of there (inaudible) I sensitivity. that still overall December margin positive begin be even to hope the because on to from higher elevate influence that rate a certainly funding deposit our see to the is rises net an the the that is rate are of has have throughout rise, balance to the continue margins. incremental that

Operator

next comes Please your Morgan from the Stanley. Zerbe Ken Instructions] line with go of [Operator ahead. question

Ken Zerbe

new expenses, accounting think sure that about in and I XXX reduction NII make right want way the to it both to that on standard, is talking quick a comment --. we’re just that million is the about a that or it the Just is numbers

Ralph Babb

is XXX a gross number.

Dave Duprey

XXXX impact see both a it’s accounting see zero income. you yes, impacted where obviously XXX that on is impact, net the and But zero growth just (inaudible), Ken not all we’re impact expense, net can by that and on income setting we’ll reduction number programs net of pre-tax, of particular (inaudible) standard the interest First interest increase.

Ken Zerbe

in on you weeks, signs loan seen have your year? the any guys the the far know so been So you of only banks concerned whether just actually very couple yields. everyone’s little at or then year And more of loan probably bit guys yield, other a I understood. of to are in terms it’s aggressive obviously but yields beginning okay loan XXX, competing about then the reducing the higher and all, a and way seeing

Curtis Farmer

I client and less would clients more at focus on not it’s and appropriate full are any a don’t anticipating to I our the it’s care good take competitive relationship profitability, of change moment. continue a or we always believe and Ken environment competitive that to Where we’ll what perspective, in a we markets time, the to a see competitive this but competitive lines. and model expertise continue business of in advantage we believe pricing we some our have but and specialty at our landscape watch happens terms just from of serve our

Ken Zerbe

presumably look depositors competition hear behaving then your of just us the for aspect standpoint, set what know that rest the there? the one why not in guys maybe you But out differently we you from yield, beta, like seeing is What’s the when or deposit banks all you much being of qualitative terms so we’re more I demanding than are a you And because question, of just just difference talked rates. remind a customer the industry, occur. is but last deposits other can the deposit commercial base in about

Dave Duprey

roughly commercial and of remains portion interest substantial the rate. primary earned the of utilization adjust fact in not long very XX% of high, programs. remains or allowance that that to difference whole any utilization credit has that or as the earning think Ken is base bearing. move a on I interest is linked our component a an to of That high, A is large funds very pressure ECM to overall pressure kind there a on product lot those been as

benefitting from we’re So mix. that

and peers has the amongst the balances. of type preponderance retail commercial you great retail of is competition to relative the the bearing preponderance, interest as that our seen to not As read

Operator

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

John Pancari

side you M&A from loan deleveraging mentioned of has I it borrower on terms led know and to the pay-downs. growth, In

utilization to they cycle, and us type quarter you say line then know is quarter ’XX. it can pay-downs that was of amounted lets’ Regarding your so idea versus you I what separately where ’XX-’XX at the this Thanks. in last give all no mentioned guess where through now of reflationary last it and I change, an real saw

Curtis Farmer

the couple around that maybe a client mentioned with Curt, to start in already and of we activity John, reference. this and general is things first just part of you your question

more markets lead I up we words we’re from to capital. wise of overall. a and through previously borrowing terms cautiously terms couple see tends activity for standpoint, some markets will impacting type sitting that if speak used to optimism I’d so readily very closely but of that also us cost M&A you and From say cannot around of general XX% a the the the of overall, we In in utilization I a in to and I change think optimistic (inaudible) liquidity, labor the speak data activity general tax the also for think could And customer reform might quarters. I’d help continues track there were not say of activity free that just we changes, that standpoint, terms I’d at sort to be on I past in quarter. But do in range. an non-relative general, been it’s have economic cycles, prior range specifically fairly available. for that say case,

John Pancari

this impacted that balances Do pay-downs loan you quarter? the have loan

Curtis Farmer

not. do I No.

Operator

ahead. of the Jon Arfstrom question Please comes next line Your from RBC. with go

Jon Arfstrom

of maybe follow-ups, couple Curt. A you for

simple middle you’re couple general than quarters say more talking about Just by Would and you market question on been were potentially and your middle general growth middle led optimistic that the today market a of general in market. feeling you’re ago. you ’XX

Curtis Farmer

Yes.

being were they and the clients I some that of with based and more optimistic that’s on are I think am having really we doing. conversations that planning

have the operating meet our needs customers major So CapEx cash but I doing expansion. borrowing sitting sidelines, that not maybe on flow been to think

that’s that of to from customers think activity. from least planning to, perspective starting starting a hear at we cost increased that the I are

Jon Arfstrom

wants talk you Tech what bit touched your about little happening (inaudible) a and what’s expectations it on a a are? growth life who But to of Dave a as and on bit sciences, there driver handle it.

Curtis Farmer

little still that become technology life seen fund that lot core group venture firms to where continued net sciences our really equity to the the in of a really was we’ve and quarter has it’s creation would so it that bit for we expect capital saw continue capital, I a and we focused equity business provide services flatter say call The like XXXX. growth of in lines in a in subscription The very us, the business. core there competitive. business been we capital we and private

million work there’s Some and firms fund so $X venture lot I flattish growth that what maybe little a does transactions we’ve And business to That’s services, more lending, do, sustainable $X a of based core more the so it get lot a $X lot require of traditional previously. in this there. in growth expect selective we were than get up we with a it being that growth a they probably general just equity to are from bit very we of point capital we in million, of a XXXX. of would saw on volume but more XXXX say what seen will million,

Jon Arfstrom

or Okay, that you’ll you you do as subsequent for the rate this is in about earlier increase, at Do tell have expect to point? on that deposit call. this each makes talked sense. Dave you adjustment with be the something it may to difficult too

Dave Duprey

closely. the we’ll certainly a competition monitor future, watch will but that. the can’t very predict jewels Well We’ve we I number

remaining We a while will remain, said I are as competitive. ago we

question. competition So answer that the probably if your moves, will

Jon Arfstrom

But energy, you somewhere. it question some here might about And on release ability had in to buried then be reserves. have talk any energy you last can

Ralph Babb

number Yes around of our and still we progress energy Remember have XX%. releasing now. quarters they that criticized lack though reserves a over although it’s

The healthy there against we So, amount negative that if provisions. book. take we any that on impact energy we’re credits, energy shouldn’t holding stubborn do is reserve charge-offs see of more good (inaudible) in the news any energy

Operator

Woods. ahead. Please from next line question Klock the with go comes of Bruyette Your Brian Keefe

Brian Klock

is about talked (inaudible), liquidity, you have if X you earning wasn’t for of liquidity I the in you about excess sure assets. billion sitting with Dave, the question the excess still

about I more thoughts securities you are know that growth with, if some but it’s to of come portfolio. through flatter doesn’t curve, of any what because about putting about and loan thinking talk Just a work

Dave Duprey

with what tell will in. you believe of I you Brian, kind I answered you think that

those that investment Given know maintain yield perspective. from that while And levels. attractive term large believe curve, term [intuitive], uptick portfolio not some still yields, but And billion. low it’s long to we’re all that at looking to certainly today attractive flat are like around but at yield a slight very those XX all I we you seeing long in (inaudible)

Brian Klock

point portfolio inflexion this just And I at any in higher from at point. coming guess purchase your that, new the yields that of looks like money is an in

So make does as going well? forward to it seem sense

Dave Duprey

hard tell, beta. the put forward been to off always securities that in have versus it’s Going we upgraded to able some late portfolio but certainly

Operator

next Your go Vinning of line with from comes question Sparks. ahead. Please the Mosby Marty

Marty Mosby

of couple levers have you about, sensitivity that is earnings one you ask to have. Wanted the assets you

Are are as this to the structure vulnerability not the position evolve that How leave up, position back do What go to that? to showed. given have loan to plan point? funding when rates down? us? do Do going begin eventually changing neutralize at go around start you plans and rates rates you are your your you As one you to a

Ralph Babb

Dave you mentioned that earlier.

Dave Duprey

Marty often we look at weekly on basis. a

are relative it are is look we challenging day, what’s locking we locking flat at think forward basis the reaches forward XX when you how that of (inaudible) hope, regularly yield points bit mentioned and (inaudible) curve in locked as we at moment, out opportunistic. the And where at that to the or At having this I certainly XX our and see are and actually of then a will finally what We yield picking attractiveness in, the curve, of earlier, curve, options years a in. what even being all we that is may start that indications steepening and some four are for that happens that attractive some in again be of the we us. to to if point, yield

Ralph Babb

this the over And been what --. far topple you we’ve might (inaudible)

Dave Duprey

at frankly and XX And to you a lock Historically we in get back basis to hope some and again. month that on maintain our asset relative point we sensitivity reduce to that quite try dramatically to neutrality. XX

Marty Mosby

of rates of sense the in have target kind using see you curve a do do for swaps the [list]. yield And interest when and you

than that am gap want tactically, to that you have narrow strategically You do am vision know thinking I and down? not more you I that just

Dave Duprey

frankly continue that factors is, Part or what even this rates has (inaudible) what’s again their we comment of movements in going you of are different that relative obviously positive it as hear are irrelative are commentary quite the out which to of to its failure of believe are curve, some very as at. contingency the a plot rate yield to either several of in at late improvement, of holding to a well really look it’s bad are four factors be fed forward trying There plays part they sensitivity. whether message coming rates

you side anticipating of are that moment side we the at the that. not look down and you either other The (inaudible) the what more on at think do are

We are from the hearing certainly fed. not of any that commentary coming

risk a adjust obviously we could at see this that high and as point in Over we’ll accordingly. that don’t So time time. change

Marty Mosby

it to come the XX you balance Would And those see more I then sense in on kind liquidity with from like even that. want all do talked possible being X the when XX, a pulling yes be to over interest pull of excess pulling being how that that scale strategic in we utilize, end, advantage you or of up have a take get you to want rates. scale things to as capital opportunity sheet, the kind or the of capital the and this as a sense you to in productive the long run of about aggressive, envision

Dave Duprey

capital just to focus return to Currently very and to comes we to want our want want if currently be shareholders. to We’ve – enhancing be aggressive overall. continue when to focused managing it you on

accomplished performance performance. terms to of return increasing a on our relative overall now equity Our have of lot focus we and as mentioned in (inaudible)

capital continue terms overall optimistic going CCAR we performance. the at us to our the to return distance, future we capital and of pushing That increasing of forward, do in confidence on submission. in look gives at when capita very when remains be about shareholders strong potentially Our that increasing pushing our we terms request

a of today or two year in certainly our a was put higher you to on that want do much So spectrum, it terms is confidence than level where ago.

Operator

any to remarks. the and closing turn Babb, now for Ralph will CEO call over Chairman I

Ralph Babb

a very Well interest and you much. And you join great we we appreciate have you very much you taking the Comerica. us, Thank in time hope today to day.

Operator

today’s this now and joining all and you disconnect. call. Thank Ladies concludes for gentlemen, may you

Comerica (CMA) 16 Jan 182017 Q4 Earnings call transcript