CMA - Earnings call transcript Q2 2018

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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 Second Quarter 2018 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 to Relations. over like Director Darlene the Investor of turn now to conference Persons, I'd may you Ma'am, begin.

Darlene Persons

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

our section actual risks cause contains you and available Web in site, should slides of statements. regard, slides provide can additional that which results as Web this we and press call to in comerica.com. This Relations During our that the -- the presentation, uncertainties SEC’s will forward-looking vary that be on conference release be materially as well are of mindful The site, expectations. referring presentation the to Investor detail. And from

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

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

Ralph Babb

both for Act joining to are bank tests subject you the call. no thank that size including holding CCAR. Federal stress stress and morning our announced testing, Dodd-Frank supervisory and month of Good our Last the companies Reserve longer

position capital to performance our return increase to financial meaningfully well and us Our strong shareholders. capital levels solid the

supporting manage our continue growth our in to while will business. We and base capital investments properly

more actions that announcing July a effectively is time. planned to capital expect and Our capital and Its quarterly. meeting at XX our able issue press efficiently take release on next actions now we be Board will to

the ratio In addition, certain we liquidity coverage liquidity related and that longer the such reporting disclosures. reporting subject are fed no and recently announced to as regulations requirements and

in positive changes. still the are We of of evaluating effects these process the

focus efficient and while of communities views for constituencies most of benefit including resources the business the all achieving customers prudently. managing our we remains Our of our our on the our serve,

our to of quarter Turning $X.XX million share. results, we financial reported earnings second per $XXX or

as share tax share per Relative as income certain and the note, which accounting including of XX% interest loan earnings up initiatives. continued rates deposit credit income to last the of is On pre-tax our management and primarily execution to increased quarter. to This related quarter higher, pricing XX%. Our per X, certain the our items due moved first increased adjustments over have are quality year, Up our second successful improved we XX% and of Slide outlining earnings well The GEAR is as the return from the found figures the can adjusted and be assets related The was Please noninterest benefit the on we expense employee XX.X%. law return against impacts relating the income. for adjusted and equity new restructuring, was tax a to on quarter adopted fee XXXX new stock recognition match first in for adjusted quarter transactions. X.XX% standard second revenue appendix. expenses in

over and services and national as Also component posted Services. the growth several compared specifically Seasonality quarter. quarter middle results, or $XXX were X% grew equity specialty of Dealer and up fund Technology to Sciences, to first our the helped in and quarter well National market businesses. drive in increases Banker $XXX second million X million. we’ve the average Life of Turning for as loans our Slide overview Mortgage an second

rebound benefit a our net from balances Starting deposits. interest was million. deposits, X.X% due consistent income in with increased seasonality began to or declined $XX $XX mid balances points and as bearing far seeing interest million X.XX%. years. non-interest which prior increased net trends interest in deposit The increased rates Net primarily in margin quarter, is average to basis As we XX

rise benefit we LIBOR, increased With the deposit in our faster customers. to rates

the In in in customer Noninterest particularly income. benefits Noninterest lending salaries and of We in offset by in return was with a not which lower loan including the we Also in call over as up refund million was addition, offset expense We commercial This $X increases over had will shareholders. first were million processing income shares million. by decline outside who I'll a to with increased more X.X $XX advertising. Muneera, as problem XX%. million quarter a expenses $XXX and dividend losses nonaccrual in relatively Equity allowance A repurchase fees seasonal broad-based restructuring interest loans was capital go negative led in were increased recoveries expense for customer a driven or million a was increased to tax now, And provision decrease to repeated. a quarter to detail. received derivative $X and income, our well loans. increase was recoveries the stable. and turn business our net and reduction strong. charged-off our

Muneera Carr

morning, Thanks, everyone. Ralph. Good

Turning Slide to X.

pick the grew a home normal increased quarter. Second nearly to Mortgage spring $XXX first loans million in compared $XXX up loans sales. million quarter with banker average

purchased three in heavily growth sciences, equity with XX%. fund markets. life be to increased continues of refi-ed average weighted and the and our to to portfolio in services home We had $XXX industry market general purchases all specifically of million with Our versus growth compared technology solid middle approximately nearly XX%

seasonal over in [indiscernible] million buildup increased inventory. to dealer auto portfolio due auto $XXX also Our

lines offsetting maintaining competitive a of decrease national standards commercial large specialty and loan underwriting the as number our in our key payoffs. result environment. and of selective and private pricing entertainment. the large base corporate addition, In including growth few estate, in we saw services business a this real a environmental with we across Also, highly in growth a banking Partly remain

technology of prices. increased up loans the the slowed, in have Also, economy, is trade mortgage in to $XXX As evolving from and the asset and million due all lines. but decrease sciences. with of markets period-end be nearly the from pace capital and commitments by positive, business reflective loans activity uncertainty were driven customers Total banker energy firmer sentiment largest continue anticipated, increases contributions sales resulting regarding $X.X continues yet Overall, improving given life billion cautious to discussions. commodity

our basis increased basis which including points. loan are Our X difficult day points. added Nonaccrual interest point in increased basis added to million XX average and LIBOR rates, a XX points increase Higher XX yield. recoveries basis predict $X to XX yield

dynamics shift loan the added points. portfolio mix margin such a portfolio as X basis Finally, and the in fees in

pricing. loan Importantly, we a are relationship strategy to appropriately focused on manage

in as through in we’ve customers see on June do in as As deposits quarter. utilizing you middle to following deposits declined $XXX quarter deposits their cash began collection years. they quarter June seen average positive for in growth Slide over included million in Also, result the can deposits was tax second interest-bearing Average decreased businesses. in primarily we typically Midway seasonality many the grew trends. as see the the May. X, million seasonality. Municipal highest of market a first by impacted their This $XXX

we our offering in growth in on increased with help conjunction stay We back the to deposit In and appropriately LIBOR, rates. the continue of expect products. pattern. line to in faster priced ensure year our We to relationship half with rise customers historical rely we’re close the and deposit model the competitive

pricing are believe and we Our don’t while managing well our positioned actions. costs. retain primary objective incremental We deposits, the standard time present similar attract is and at to expect

have securities yield book about and million value. Our minor billion the $XXX $XX at loss X. to as the on a was trend purchases the impact XXXs above unrealized of in quarter of portfolio the $XXX continues in the The million we on The downs shown received low in in remains been base Slide up. pay portfolios carrying which Recent position had quarter. the securities two a average in

up X, margin $XX basis interest increased points. to net million income net interest and Turning Slide was XX

rates nonaccrual additional the in quarter. XX benefit the loan and recoveries margin. portfolio Increased level one points interest interest higher added Our and day with $XX balances loan the high unusually largest million of to and provided basis along

benefit in fed, far mostly of This the As basis points X offset at to balances. decrease the net our rate higher average was by funds margin. a the from fed the as resulted benefit deposit in a

credit. only funding million were XX of the of XX% six month were loans reserve and decrease a vigilant This costs nonaccrual rates as On This continue wholesale basis costs million end. XX criticized pay $X increased up now in the migration points increased and increase represents comprised basis are $X look attractive net added high of stress. loans loans to quality by Total funding in as LIBOR of total a at million. release the side, remains signs rates funding of $XX of remain than deposit a reserve Slide was $XX included million $XX million to any XX. primarily to resulted this contributed we as of the increased million our a discussed. of or positive unusually X.XX%. In in some X.X% or Gross more and $XX result Energy in quarter continued shown million in a in as loans. only Also, X concerning points impact. margin. FHLB We basis The decrease. not to previously recoveries and due had I offset rates. the for declined result credit which from $XXX charge-offs ratio criticized strong impact summary, Credit At a nonaccrual point, total and first points loans quarter at that

$X customer decline $X partly investment to commercial XX. well offset syndications by income. in included as in primarily banking million. derivative fees. related income million a This to Noninterest Turning as a Slide increase loan This fees, grew was

comp by related remain our raises, well To fiduciary, in This Salaries see and our efficiency we and the following to Class remain card, In shown a $X first target. XX. taxes offset GEAR for to and derivative the fell We a Up payroll quarter. progress, growth based and incentives million $X on performance can basis on to by in financial have controlled track B you the shared higher as day. brokerage. reserve Expenses addition, higher one partly additional shares and we Slide revenue XX% year-over-year million. merit contract annual annual our our was highlight related decreased ratio on Visa achieve benefits to achieved increased

the in We to We was revenue of advertising the continue as quarter. past in seasonally tied nearly generating over from execute as first Up initiatives, X% which evidenced increases to quarter reduction year. expense, and mostly workforce X% well the was activity by outside low our which total had our GEAR first processing, as

had the You may million million first we and of of charges $X were Slide can it quarter million, decrease from quarter, repurchased or was the in as $X first tax recall see million Restructuring you that our refund a the program million quarter. second repurchase X.X a In $XX under equity repeated. business XX. shares we on $XXX not

dividend shares activity during the addition, per Together dividends, In Employee per $X to to $X.XX provision tax to million with added credits or $XXX shareholders. share. share. quarter. $X.XX our million This we in increased XXX,XXX stock returned resulted activity our XX% income of we about

expect after meets capital provide planned actions week. to on an As we Ralph next our update Board our indicated,

to continues XX, Slide in balance to positioned increase be to well Turning benefit our rates. sheet from

cycle by our our with XX% illustrated betas beta so is sensitivity a is this XX%. cumulative deposit of while loan far asset cumulative beta Our

outperformed asset line. bottom betas flexibility us allowing significantly costs manage our to to adding Our have while some our expectations, deposit

million, to the $XX already second in last the $XX benefit year. net estimate increase and Out increase. from rate highs be million In quarter additional March full-year three we increases and $XX this net million total, additional second from rate. first $XX interest year resulting in million XXXX, the income impact and in interest million of to the run in XXXX for $XX the June million the the from expect rate net is $XXX our million quarter We income to quarter rate $X of

points the loan are deposit short-term We remainder basis we approach our of XX year, that here. customers. to current rates to and on pricing from attract the X level and relationship remain manage focused retaining average For rates at and assuming remain deposit the increased to

to positioned deposit likely rates depends on is LIBOR the as movement. more factors of loan pace that the fed outcome raising two and at times course, ultimate well balance stand such the balance a our sheet with once which year Of we and further benefit or variety sheet. this could move, competition and be It

We have our not added hedges asset sensitivity. to change

and Committee given balance to movement to the our for Our Asset path continues appropriate sheet Liability our position outlook assess rates. determine

to update call on to the turn of will for remainder our provide Ralph the outlook I back Now, XXXX. an

Ralph Babb

Thank you, Muneera.

interest outlook continuation our assumes current of the usual, a rate As economic environment. and

mentioned but it's the regulatory effects recent of I guidance As as positive, changes. too are to the the developments elimination of beginning provide these certainly CCAR on and of call, at such LCR early

seasonal the Life well the due As we increases to back a expect in far drive growth slight growth summer seasonality strong market decline to as This in Sciences, a as in as Dealer the a primarily middle following and reduction of somewhat and the second most Technology mortgage pace banker, by due to includes in led half loans, businesses quarter seasonally year. slowdown. tempered by moderate typical of

the elevated we rise growth and contributions are in we to $XX well repeat of nonaccrual the to positioned as Regarding increases. to outlook, additional not Recall interest in any $X from quarter is And recoveries $X benefit Muneera second Also net see days. quarter. we short-term net of this included not we loan interest million. This in benefits rate typically we further while rates. million to per expect as expect level to expected recent continue the million from income, had indicated, collect

per to strong. the $XX quarter $XX and million provision credit expect remains be quality We million between as

income. of Our in growth helping the and with fee initiatives, to is GEAR continue growth fee, income Up treasury trend management expected execution fiduciary card drive our

result modestly of restructuring are in days from a primarily expected Excluding to back the increase year. additional the costs, here, of half expenses

our to be fully realize continue savings. to We Up track GEAR on

We the million. second year technology pressures the $XX $XX typical advertising. inflationary well be as and million expenses half expect should as costs rising project occupancy seasonal to and for about on of Restructuring

positive efficiency and to drive lower. We continue our to operating expect achieve leverage ratio

we approximately to difficult pre-provision impact helped pre-tax to to maintaining for be closing, continue second rate net revenue In our we stock quarter our expect results excluding expectation XX%, predict. Finally, employee are effective any from tax Altogether, are which transactions increase grow. to our our continued solid credit well-controlled and were Loan line growth pricing rising fee our to metrics as and combined first the with bottom expenses in to and income quarter. to we’ve a relative favorable rate drive higher XX% deposit in environment. manage loan a

a recently in capital result start announced Board the week. the call will As our I next mentioned and of at our as plan changes of regulation, review

economic our We momentum we are maintaining any be of return to capital expect on increase We well positioned from Furthermore, remain additional our shareholder to we to take happy questions. and benefit shareholders. meaningfully your now, returns. to growth. rate increases driving And focused in will

Operator

question with [Operator ahead. Steven from the Instructions] Our of first Alexopoulos go Please come line will JPMorgan.

Ralph Babb

Steven. morning, Good

Steven Alexopoulos

the your morning good and on guys wanted are Ralph, thoughts CETX much how Hey, everybody. start I to capital. you to run need What long-term? updated business

Ralph Babb

I -- think as we as to future the will how out That develop. We in really this we our haven't as a things will see there view what time. point at come be put look

Steven Alexopoulos

think Board this XXX% Ralph, I meeting, this on move us what’s where upcoming options you range we like what you to meeting? help think for could historically, as the about you were plus about of table could at? mean, looking And now are Okay. payouts

Ralph Babb

think is comfortable what that but And standpoint And that. at it Well, I on I you'll that manage back ability Board. hands looked it what what our we and feel from the it, with I forward. we the in on the be appropriate capital along see business the with of to puts wouldn’t ranges think moving -- with I you will see would is put tell based

Steven Alexopoulos

market, this market general are your year-over-year. at with And you. then lower if taxes? What of benefit it's business, of at Thank most commercial doing middle the on middle flat customers still pretty we Okay. look the point

Ralph Babb

that? want you update Curt, on to give an

Curtis Farmer

of Yes, as Steve, Having I the all three said may on the house. we regions caution remain the of our had the relates momentum tariff happened market source that, probably to, what of greatest year. not we or think did right middle good growth to now the have of see in alluded customers the side middle and market half first may cautious, Muneera in

in or reform in the are not that know in like have I more yet transactions the has growth, their this M&A loan You occurring. of type of traditional for works customers that Most needs. bit terms what expenses less seeing back our customers borrowing would have against line. terms a short-term either into call participated CapEx traditional tax lot we working capital spending fact of of business borrowing probably been a to the little cash But we plow

Steven Alexopoulos

then And just strategy. deposit one Okay. Got final you. on

loan at now it's and active necessarily you are fund size you balance and more XX% do of you the you think loan likely do Thanks. LCR, around trying need expect growth With out to the deposits grow forward deposit or sheet? to not cash grow ratio to will of be going to the from securities,

Muneera Carr

This is Muneera.

Ralph Babb

Muneera, [indiscernible].

Muneera Carr

our as to I deposits. loans well mean, sure. both objective is as always grow Yes,

We will be focused on that.

doing we able see side do can to an to retain You are that on cost we deposit the need attractive be deposit. what to

Steven Alexopoulos

Okay.

Muneera Carr

us. But clearly I a option that will is available I standpoint, to is an mean that, from also though add security that to

securities forward, being us, of of subject is certainly a to LCR. up for Going frees It reservoir funding. liquidity that not our source book

Steven Alexopoulos

Yes, got you.

color. Okay. Thanks for all the

Ralph Babb

you. Thank

Operator

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

Ralph Babb

Ken. Good morning,

Ken Usdin

comment basis morning, so deposits you Thanks. basis XX costs interest-bearing half, bit your to about Muneera. Good deposit little Good second regard can the expand morning, morning. a XX Good the points. increase Muneera, Ralph. in in on point

hot the terms in know of the You fourth? us XX out year, the the I third how that the topics can you're so of to in there. both for the rest said one about it's thinking means trajectory and what X tell of you

Muneera Carr

Ken. Good morning,

we’ve of thus deposit with costs tell far XX%. cumulative you beta the I a So great done managing will of job our

about increasing saw been that the points the have basis We XX in fact first talking was We two different. QX LIBOR quarters.

We have XX positioned changes to some well don't deposit in another earned again. to magnitude position see something jump expect of competitively. We we cost basis believe us a make our that point to that

signaled costs every generally have will continue passing rise. increase that, to We rate deposit with

comments, to XX For would XX% of translates X that then increase points basis the are asking be you heard beta I to a June, to you my me if And for conservative you XX%. go, both fairly some refer will things for to XX% standard a deposit where and assumptions and trajectory model includes now have runoffs. beta I will about which as our said

I continue update closer will as to the see lowest happening the we even tell peer costs costs moment We be will well you will as increase, balance in with deposit own the folks What as rises get what's deposit total as point off one the environment. is basis competitive rate basis still XX our sheet on the can our in points XX group. of our

So to will are what it expect which I on up, firing be far clearly able in see give out but the up I to going there. depending costs we hold lower you will that cycle, the expect on so some down seeing benefit that in don't will we we from that betas deposit and variabilities stress

Ken Usdin

to standardized not mentioned the follow-up do that, increase that, And that It as expect your good. broad again. at bias like done through to so What Very point? to standardized do is change rate you a to your about would a one put now. and and entire don't to go right increase you seems least back that to view sheet having your you’ve

Muneera Carr

Yes.

liquidity on overall, ratio. well-behaved. far, environment. happening depends the say be industry on loan deposit happening so to lot would There that's in bias see what’s continues depends the to a maintaining having competitive So, is system. own amount I a higher liquidity, our the of what's deposits. It corporate levels with We in in up that what's shows bearing a still to of fair treasurers non-interest

the know necessarily the to -- change. and goes price another its And balance looking to system, of well you is broad-based won't continues, think that affect fed that that that I be unwinding to all how that that where said remains be all make sheet. But How extent so that, having seen. the we

Ken Usdin

thing here, the basis quarter is Okay. points to the final that And be of in that said to then last expected from half? second XX or what just happens each view is X your is aggregate you

Muneera Carr

beyond which That June will is go -- will the singe I it's to will look variability. like any It at to rise. said, given the specific be rate to I XX% thus on expect model the I will that, our there drive rate some and said view you at date. is I for down, benefit far go we’ve but that it close to up, tell

Ken Usdin

very Okay. you Thank much.

Muneera Carr

You’re welcome.

Ralph Babb

Thank you.

Operator

Pancari from Your the John ahead. go come next will with Evercore. line question Please of

John Pancari

morning. Good

Ralph Babb

Good morning, John.

John Pancari

overall appeared on quarter we specifically side, expense base higher modestly to. guided expenses what first $XXX the in be to believe than the off in guided for down have quarter the came expected what million. higher On core comp, come you of it I to than had and you of

us somewhat If Thanks. drove what the could So well? you around specific some the you level for give as expected higher comp than had color quarter?

Ralph Babb

Muneera, take that? to you want

Muneera Carr

Sure.

overall Our out rate the outlook at economic would performance, job numbers. that has and we All are was improved. one we that workforce based of you time across movers company's rises. The metrics, come salaries is board. more see earlier look really really we good that’s that from this And that situation inside year if I you a view two expenses We’ve on have and that And doing I mean, performance progressed, comp at through What rate has benefits to we incentive well financial has see of the pointed means pricing. look hasn’t environment. that expense. the the loan you can on continuation credit managing deposit outlook as has and a changed. received of our done provided changed the

but shift. to for expenses, main watch that’s the our continue overall the reason We

John Pancari

So structure? there is a comp change formal incentive in your

Muneera Carr

years with on and performance structure the comp and it The moves exactly No, good bad depends there and solely is isn't. years. same

a good the and having year hence, then, increase. are We

John Pancari

And the have separately cited you that right. appears in? for loan Is when then gave and that some you you on that on what at of and in the moderation it dialed growth All April midmarket update some of what look June. getting us that been pace the side, accounted May, side, you that saw Okay. there might cautiousness

Ralph Babb

that? to want you Curt take

Curtis Farmer

of that’s Yes. thing tends you When strong the think a sort main Mortgage Banker seasonality our quarter. Finance second and case. given us thing, us, be to the for John, forward be look to a at for tends the I around specifically Dealer, for of to remember important go fourth company, quarter a quarter in Mortgage Banker the Dealer Finance. quarter strong the

our of specialty continued that when seasonality expecting we’re the for slowdown can in we’re we’re out and you the as market in Dealer like the most I real of the So life with year language and probably commercial using middle of business. Banker point and year, clients. of into is and see growth in in seasonality businesses, other sciences, few to But third Mortgage our the what a taking normally sort middle quarter well select many that growth our we growth consideration of other Finance for and moderate might of market remainder summer remain lines estate specifically and see technology

John Pancari

Curt. Okay, got it. right. Thanks, All

Operator

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

Ken Zerbe

Thanks. Great. morning. Good

Ralph Babb

morning. Good

Muneera Carr

morning. Good

Ken Zerbe

hoping was Just go more. start a bit beta, of guess, over I asset you to, kind in of off can want little just that I terms the

XXX% beta of talk of to a get reset? core, terms like fed funds. higher just I love a detail? I which tied you total off in something more know can resets, than about went drove asset your think calculated but how LIBOR was more besides up the the would loans like fed of the funds that you’re like LIBOR, in timing there Just Thanks. I of

Ralph Babb

Muneera?

Muneera Carr

have well, morning, beta know that points really I basis this quarter. Good Ken. XX up been asset

that LIBOR recoveries You that having were unabated. would nonaccrual XX%. do, as rate saw through pulling through us XX% resets the I we increases typically is interest our which expect actual normal effect is But this really about of to and flow

our what basis basis up, goes points on be side. expect you in an should the about as points forward should we XX, XX So LIBOR either XX on of see That improvement average, asset yield. going

Ken Zerbe

you. Got

Okay.

So particularly is this unusual. just quarter

Okay. go And ahead. guess -- then, I

Muneera Carr

going thing to out, No, up basis XX was the did only I go point points mean, average. I LIBOR on

Ken Zerbe

Yes.

Muneera Carr

pulling just through they’re of that. and benefits the So

Ken Zerbe

clear say, we costs, the example deposit Understood. be if points, it's third And yields but generic your you’re basis X I goes just I use it I go quarter, points. whatever, then the XX, example margin if for deposit I super interest go about saying am that loan XX your points basis on guess a to in up LIBOR just XX know costs thinking to basis XX and also bearing will up, up, think was right

be Am looking kind mean, correct? of expansion So, should that third quarter. on I up I we the magnitude that’s for of NIM can run math we the non-interest bearing conceptually but thinking etcetera,

Muneera Carr

I would don’t thinking used average I go, so You’re know to accordingly. correct. say where is LIBOR an XX it going conceptually just I as about example. adjust

Ken Zerbe

Understood.

much. very you Thank Okay.

Ralph Babb

you. Thank

Operator

Please line Our ahead. Erika next question come of will Bank with Najarian America. of go from the

Erika Najarian

morning. Good Hi.

Ralph Babb

morning. Good

Erika Najarian

some of about change, as thinking to flexibility growth? we’re HQLA currently of to by some fund of much you how flexible we you as that potentially the And think regulatory today? in afforded can loan have So HQLA the how do pool much

Muneera Carr

have clearly available broad we just of funding It's ample a But meaningful strokes. number in today.

something we something So changes. is it's balance -- not tap can sheet with the as this

Erika Najarian

it. Got

Okay.

on answered up that one you following far answers. you’ve questions thank for me follow-up all the last deposit much for so so least and at question your Just

observing mentioned we what reducing think of interest course of Muneera As to rate we think about municipal quarter, we sheet noninterest question, should continuing balance the to mix the seasonality this And you the deposits its outside last normal dynamics bearing for what up about broadly how think of about you level Ken's trends? just environment normalize deposits you with that are -- saw and Comerica? following the fed shift a as of

Muneera Carr

headwind points portfolio our seen municipal changes with when us. for been the right, you’re when that. year-over-year historical look that, at at times on When a we’ve Comerica's past. portfolio, we look trends, deposits balances, what the in our behaving customer we of at in line look in beyond we couple A But have is

it's several back us trend Comerica typical as So half very to half the decline first in of deposits the for typical year. in to very this up past. in the holds for have true of the in a year for It's go years the

We our to we where customers things their capital they’re their do that’s as leverage, putting so based It's M&A, money for said, view going are the what some our work. we money at working reducing least would seeing we us using And in needs. what on are near-term. for to for be people see of

And so continues. certainly that

Beyond it's just how and difficult deposit see have with balances. will evolve that, we for what happens us wait really to and predict things to

Erika Najarian

Got it. final me. for question just one And

expense that just indicate your guidance. for looking at 'XX. And Just a had billion quarter, of which did number, on to what at put forth increase expecting put guidance I you’re mentioned you for XXXX you that a change this the slide comparing clarify that slide the an in expenses, a adjusted in last I the base last terms you wanted outlook quarter noninterest and language implied not X% time think X.XXX just different quarter over

Ralph Babb

Muneera?

Muneera Carr

means than surcharge We were that what that of wanted that clearly what expense things be goes were estimates has us we away reaching And there environment. we has million, of would are comp the slight adjusted. in to point And continuation slightly it to along go when and this the I reflects. that our interest it [indiscernible] for costs rate improved, because original compensation needs and to change. half the percentage back and on economic as hoping that’s that estimated, $XX a with and higher get expenses is isn't certain of there incentive it reason go the recoveries that that’s been will so have so originally be course, that indicating some like we out Also a FDIC make quite our another to, interest based

Erika Najarian

improve meaningfully, end efficiency at But it. to of continue day, Got the the okay. will the up

Muneera Carr

Yes.

Erika Najarian

much. so you Thank

Muneera Carr

efficiency increase, will fully the we for you to thank positive expect Yes, Yes, have me. operating reminding leverage.

Erika Najarian

you. Thank

Ralph Babb

you. Thank

Operator

go from of next Bill Please line with come question Your Nomura. Carcache ahead. will the

Ralph Babb

Good morning, Bill.

Bill Carcache

morning. Good pace capital specifically capital of you. I on Thank had follow-up a question Good return. morning. the

have regulatory CCAR you that through seen. process there return And in you this gradually of need now through submission greater been time the view payouts question keep to what freedom for feel simply under clarify you to had and the but that rest? just guys light the didn’t take you to changes made So degree you which made the the ultimately go the you to that you can us you feel Do have bound the that in implicit submission. nevertheless process, like we’ve is, by over then you had that up guys

little could would give you a color be great? If bit of that, that around

Ralph Babb

we as we when earlier we there out discussed reviewing and the capital. the basis, -- Well And manage to economy or look need as we have effects a capital what where effects on normal be ability from in our to to we and the growth we then at will forth. basically you the so where what be quarterly a and are believe we be doing standpoint will

capital was high. now Going our to And of that point as understand want forward, right but it to and a be future, may in over move is do think CET we put road is that think We first while the haven't from we a well all I want we I XX%. down the out earlier asked we pretty where standpoint. a

Bill Carcache

Right.

that recognition a -- have you take and is at the evaluating levels, there rules? that at that under would and different to quarterly are outcome your you capital the you basis a able and, potentially essence, a arrived consideration previous into in that changed are therefore, in arrive so have on And rules

Ralph Babb

could We forward. a year more focused agile that be versus makes us look happening on purposes out capital what more. or to today in managing and much going And our more over happening consider what's is having

Bill Carcache

That's a great. related If you. M&A Thank follow-up I may on question.

after similar little your M&A has investors some your concern value has to we deal changed significantly that dilute potential for from Could recent not release or CCAR? tangible that you appetite speak have the have capital M&A seen your some of could that bit a that CCAR, an could Now with you released been in expressed some excess of whether the be consumed from have that deals book to from others.

Ralph Babb

for especially changed. with the available I our and where look focus have at that at there feel very And moment as states top would a is is but we today, chart where when growth in grow has the always the said we internally are business take we comfortable became potential not doing to expansion. and we it of say and things adding will the them, our footprint

Bill Carcache

questions. Thank you taking I much. you very my appreciate

Ralph Babb

Thank you.

Operator

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

Ralph Babb

Scott. morning, Good

Scott Siefers

and and Good stuff through with you do capital, what it question morning. changes on will relates as same sort excess getting how behavioral a of sort of Hey, etcetera, rapidly. risk few go but being under a you released example quick means and of just the what post-DFAST dozen will measuring more this to practically your CCAR, a just -- you own the excuse that of any not have me, CCAR you to from with for assumptions place Ralph, for year people levels dozens get much you spend or can --

if will want there you opportunity presumably differently expenses. you’ve is be flex what get that some or And internally flexibility to relief? So savings, this even the to got you into some of now don’t doing just

Ralph Babb

and we’ve now the process. earlier is be through doing remarks for had As deciding those going done what the are put looking going say process strengths will to as I going going But to mentioned that. some that guess the forward the of is building forward previous savings all and way we there right some we be together things going will be at and we what it expenses. exactly And in well. are we what want forward the and save will to use I do will there But in

Muneera Carr

to the same lot was more thing. going efficient. to going a it's was be I say going highlight I to

Scott Siefers

Yes.

not seeing iterative … probably of on it's sort guess, now an I process, [multiple that’s And, but Okay. You something you've speakers] conclusions come are just right? definitive to

Ralph Babb

That’s right.

Scott Siefers

spend the it? way to continue That’s etcetera? is look to versus appropriate money some at out get savings best …

Ralph Babb

at be it, and want where quickly today. we a determination will and look make through we feel it, to do … will be it while of to but we doing little way And it where a that, take fairly best are go but the to we need we That's do to

Scott Siefers

sounds That you right. very All good. Okay. much. Thank

Ralph Babb

you. Thank

Operator

will Our with come ahead. line go Geoffrey of from next Please Autonomous question Elliot Research. the

Ralph Babb

morning. Good

Geoffrey Elliot

taking Good for question. Thanks the Thanks. morning. Good morning.

regulatory the does way thinking change and the In dividend between split shift the about emphasis terms and buyback, of your the capital there?

Ralph Babb

I don't change an causes think issue the there.

be to for. we'll at there will position and we day that prepared because the something obviously, and we ups We foresee looking we very future what the know I have past that economy in have done at in well think we the downs that go. taking be on appropriate we based will look and And that be in are as the

Geoffrey Elliot

your on of And the and a kind have flexibility the there ahead need regulator and you meeting you role of do to Are decisions? of do you can capital you just can't the return now? regulators of certain get do Board you from what and to in what terms can go have explain do perspective, if the take still own sort regulatory like, guardrails, to approval from and where

Ralph Babb

are that there things there. still developing are think I

as feel But of for planning that it CCAR say routinely the So sure even all before are. would it for thoughts make local I have with that with don't reviewed really the regulators how our comfortable our what to our may settle future exactly much I we a where in was as tests, future. we they the were and and

Geoffrey Elliot

you. Thank Great.

Operator

from Our next Please ahead. question with the of come Brett Rabatin line Jaffray. will go Piper

Ralph Babb

Brett. morning, Good

Brett Rabatin

basis? reason any capital little there I'm guess to I you obviously return process be about capital about the be more want wanted you more can't effusive not something ask and there you to you're real-time everyone. Good I a make manage can't morning, able was opaque why why I a Hi. less sure about to first, what Ralph, plan? being in just a explicit missing little is

Ralph Babb

as Well, are well looking and that takes at it is it it. And the and think little time used getting the reason just happened it is develop. we I regulatory to environment for think that bit that for a I of to

Brett Rabatin

Okay. with then the Fair on I side of deposit of assumptions municipal basis? kind core entail ask terms terms of from from just what expecting in that happens and perspective of growth, various especially some deposit enough. on you're on and deposits what does here, seasonality here of betas wanted And what categories the a kind from to a in

Ralph Babb

Muneera, take do you to that? want

Muneera Carr

Yes.

I I Deposit earlier, standard for So betas can do point in remains best lot next, you how rate mentioned be that there. would one will from I model thing overall the evolves. as to there expect our go the sheet be on is beta same now, variability XX% say, to but with to, the I rise a balance

and deposit I of think ratios has amount a the industry are a liquidity healthy. fair lot as of whole

should in least would model of this hold kind can I that best near-term at tell, the assumption So the I true. expect

Brett Rabatin

Okay. is net result or us pool whether can perspective you recovery any otherwise being of or that And then energy just could lastly, around there pool? in now from forward a the that negative credits a maybe charge-offs color from obviously really still loans good. just Right give going

Ralph Babb

that? take to want you Pete,

Pete Guilfoile

to is [indiscernible] recovers. it happen often. like Yes. recovery in and net this of a those It we’ve didn’t position very kinds We expect see forward been didn’t going

Brett Rabatin

Okay. Fair for the Thanks all enough. color.

Ralph Babb

Thank you.

Operator

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

Ralph Babb

morning, Good Peter.

Peter Winter

to that Good just guys it they are modest than growth more cautious customers modest going half, sounded else morning. the the related or is the solely loan like wars When something you talk quarter. in secondly, just And Good morning. define were in can growth? loan first there about second on? trade Is you then,

Ralph Babb

want you do to take that? Curt,

Curtis Farmer

have hearing we think who trade there kind economic we Yes, are the industry that in don’t the say probably all operate verticals primary is anything that some now. right I Texas, customers on of concern would that else Michigan, markets and from in, are of of I might some that issues we tariffs question. given that reliance the do your the especially related that trade is I California, think and start, with second Peter, on. I given going half

I Dealer that we -- want should somewhat well the to do third part Banker in is and that's that especially a both see in that Finance. moderate in middle view moderate to seasonality basis. view of market our that on emphasize and be So forward a think go and I But that Mortgage seasonality just quarter as of

Peter Winter

more you when that is like modest, And X% range? say X% type to

Curtis Farmer

I a you number, wouldn’t but that language would used. towards just guide quote we’ve specific the

Peter Winter

informal now stress separately that type longer is you exams just are test participate then bank, a And to that some of Okay. there have in? no SIFI you

Ralph Babb

will will was of looked of we the how and term. there be, that it some development said over a at longer there a in But be announcements No.

how will be looking as too. we So they they’re at looking us the and at adjusting I they’re through well what think as process for going

Peter Winter

you. Thank Got it.

Operator

from Your will with line ahead. Jennifer go Please come next of SunTrust. question the Demba

Jennifer Demba

for is question Pete. My you. Thank

how wondering stabilize grow? or portfolio stand Just problem loan in should energy the levels now the that when portfolio

Ralph Babb

Pete?

Pete Guilfoile

new space. been like We down coming quicker to keep running deals. energy been the adding from It's like than off. see We we’ve it

payoffs, come balances, highly are We loan as upgrades there to will would well. there, expect reduce but not have XX% XX% continue just would lot. which are selective a also we We through criticized. down that We like still

And so portfolio will hopeful that energy it standpoint on the balance where the stabilize from is we’re today.

Jennifer Demba

lot. a Thanks

Ralph Babb

Thank you.

Operator

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

Ralph Babb

Good morning, Steve.

Steve Moss

regard credit Good just wondering the morning. with to your preliminary impact just be guess, come to topic XXXX? the actually thought off, start and the what and with could CECL, -- on I I wanted provision just capital more

Ralph Babb

Pete?

Pete Guilfoile

are prepared regards with anything not We yet. release CECL to to

that of towards implementing. driver peers. of at thing is I’m a peers, when than less our which portfolio a big CECL our that of saying look our The relative date XXXX only we We duration substantially lot to our are will working the comfortable a portfolio, you is is be

from and impact us -- then we would standpoint duration. so it impacts And because shorter of standpoint provision should there a quarterly less expect whatever a are level from that

Steve Moss

your Okay. XX%. on over mix noninterest-bearing remains here, And deposit strong here, deposits then, really

points think wondering are goes where to do that XXX XX year-over-year, see wondering if bit just another a hikes? we basis balances Just you in -- rate down the

Muneera Carr

of and in that management our is deposit at So And of those them products. look we to majority XX% commercial of base when vast have you the past treasury you are mentioned mentioned commercial. that our deposits tied noninterest bearing,

is have these corporate of earlier by depositors. a a desire comment, levels liquidity. maintain treasurers as mentioned my higher that connectivity in lot And to that We I of

that plays all in. So

For be least go at they're far when relationship to propositions, we deposits all we along reasons, as stable those as with that. concerned, along CECL, expect things come with

things generally into that of that all of be thinking our should about So goes the kind fairly fact stable.

Steve Moss

All right. Thank you very much.

Ralph Babb

you. Thank

Operator

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

Ralph Babb

Dave. morning, Good

David Rochester

morning, FDIC further benefit to that off preliminary about. thoughts was get I On GEAR of Any the good curious the XXXX growth Hey, guys. expenses, just next know but I the expense out, you you're year about bit a down. were should of there? still efforts talking is how roll is you thinking surcharge still Up Why wind

Ralph Babb

Muneera?

Muneera Carr

Okay.

inflationary go Looking I’m typical We I simplify what mean discipline that but surcharge There to leveraging technology couple you’re have intend in to of be expense away. be I we pressures, to our continue see intend We that’s forward, of used will years. continue the will overall, sort to the efficient. going out. and last processes right, your say FDIC looking

David Rochester

thinking you Are the go sorry, that ahead. oh --

Muneera Carr

maintain will that add right the positive respect No, ratio efficiency keep I directions leverage. do the was to that in will I going moving and operating

David Rochester

do of expense perhaps in GEAR remain talking low single-digit or of you are that of thinking the can you we Up done growth you you in see about, fact the think Are efforts this a that the growth? are pickup a little range because could tailwinds bit from

Muneera Carr

believe of the level we in low that. will single-digit remain I

David Rochester

Okay, there kind you without see movement what great. you NIM I benefit in in was into thoughts bit? see would the trend rate kind cost an of little stability any hikes, In September in yield? upwards the loan a absence that how for on real are kind don’t deposit Are rate the do we your NIM expect to curious thinking of Just or so we great. And some just the bump quick. of could scenario leading in of NIM some up be hike switching of example, to the the get the a thoughts if just would

Muneera Carr

asset Yes, without but I NIM mean, in in our would sensitivity, rates, clearly still rise stable stability that will that NIM. I environment. we'd the expect to costs our have a rate expect given benefits most deposit I rate, don’t drive more

David Rochester

Okay, much. you great. Thank very

Ralph Babb

you. Thank

Operator

Your next Vandervliet question Brock UBS. comes go line from ahead. Please with of the

Ralph Babb

morning. Good

Brocker Vandervliet

morning. Good Great.

was have on how board a that most or look deposit is kind Was that -- of covered. costs was to manifest brush been just the more make pushed was exceptions across in think curious clients? I metrics second increase in I the operationally to of of thing? the kind broad that that a pull of increases when quarter, that down through the granting

Ralph Babb

to want you Curt, that? take

Curtis Farmer

I make Brock, to foremost fee we pricing think loan or and our it's relationship deposit is us whether of sure income any pricing first Yes. on that products for where pricing are taking approach.

think consideration looking and really we both we are so also a competitive And that customer landscape our in at relationships.

majority increases, at And really make appropriate we of we’ve to look that and passing far. on we’re done think thus so try to we I sure the when our as effectively clients pricing that

Brocker Vandervliet

annualized as allocation expect separately I of area secondly, fund change quantify been we And an there? times area? Could called the growth you in resource strength. should to of And several there equity terms all any within out at that's Okay. that know has been services, in that

Ralph Babb

Curt?

Curtis Farmer

formation. years growth in private that’s I arena the capital it area new or has lot lot that of and been equity of would lot fund equity, all, really a in which there of response a last been been of venture corporate for happening in what’s and First institutional the say has an several the created to accelerating into flowing There private has of a there. both has example, money demand been private

rethinking our Up, managers that we we’ve some that’s credit across our loan business around and processes appropriately is we would changing origination of which creating resources staff, of Part all In is Indian resourced capacity one some benefiting resource us from and for to the been and terms of sure we to through can approval initiative talked for analysts, going of doing needed support processes, really through businesses shift allocation as servicing are and be additional allocated we and various make look of and etcetera, that the lines. that. us GEAR Fund move before forward about Equity businesses relationship credit what Services

Brocker Vandervliet

Great. Thank you.

Ralph Babb

Thank you.

Operator

Our final ahead. line Please with Keefe Bruyette the of question come Brian will go Klock Woods. from

Ralph Babb

morning, Good Brian.

Brian Klock

morning, everybody. Good

I just maybe with already, the this the a I loans paid question want that interest to the guys So Can net us off and you but recovery? follow-up it's answered if for apologize you on size recoveries. a Pete give of interest

Ralph Babb

Pete?

Pete Guilfoile

the the P&L. to or though. wasn’t large size not interest good how say sized credits. recovery accumulating It credits. of through is the and were three driven we It much of want so Most was the interest They credit, I by, were two unusually well the [indiscernible]

some that’s And these recovery still large. of some time accruals so, not was were and [indiscernible] for why

Brian Klock

you. Got

at from of core about be could at had spot, dropped that look period you is, core the should than that criticized, of paydowns growth the -- I linked in some when say sort your … annualized so and So, quarter it that X.X% you I’m there but basis, just look meaningfully end to growth so that guess, dropped, quarter, we of trying figure lot this quarter-to-quarter, it's nonaccrual, just wrong, growth so spot what drop outside solid at I the you out stronger thinking look a growth that those loan

Pete Guilfoile

did Yes. nonaccrual some were is this loan paid we That’s impact that the loans successful getting correct. quarter. our in mean, growth I fact that off on

Brian Klock

it. just for Got And Muneera. it. Got a follow-up

and something surcharge, the looks still looks you going about like the It year. the FDIC it's to I talked on think the mentioned its of half diff it the expense the by about about is to through you half second X.XX like the the year. way when second X.XX getting of

the including in of that $X the are all eliminated half million you guidance for year. fourth to surcharge $X quarter not any your So at or million the of had getting second in you that’s expectation

Muneera Carr

It's not guidance. our in

Brian Klock

it. Got

for time. appreciate Thanks it. All Okay. right. I your

Ralph Babb

Thank you.

Operator

for turn now the to remarks. Chairman and Chief over closing Ralph call Babb, Officer will Executive back I any

Ralph Babb

being We call Comerica, we much interest thanks your today. the great and Thanks everybody day. appreciate has much. on very for very hope And in a

Operator

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

Comerica (CMA) 17 Jul 182018 Q2 Earnings call transcript