CMA - Earnings call transcript Q4 2019

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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 2019 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. [Operator Instructions].

to Investor call Relations. like Persons, to now of Director would turn over the Darlene I Ma'am, may you begin.

Darlene Persons

this our Thanks, Regina. Interim earnings on XXXX Comerica's fourth will Good morning, and conference welcome call. Curt and CEO, President to quarter call Farmer; be Participating

Financial Credit Pete Director Herzog; Guilfoile; Chief Peter Business Bank, Sefzik. Jim Officer, Executive Chief Officer, of

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

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

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

Curtis Farmer

full along careful under ratio reached income, an reported pushed in Highlights high. benefit share oriented a expenditure per which of to earnings Today, level time to of control with X% XXXX loan everyone. year the continuing of for XXXX. fee record with year Also included resulted growth increase assets all an a relationship morning, the over turn we our driving This at XX%. Good revenue deposit total base. while growth, $X.XX, strong efficiency higher

excess In and meaningfully quality capital. addition, remained solid reduced we credit

We XX%. XX%. grew Also XX%. above raised ROE increased value to dividend book Our our

the strong including relatively increased kept quarters second the first XXXX stable in growth of Deposit half two results. details in X% provides Average of our X resulting the significantly in year, Slide trends loans year-over-year. year. the balances up a

as an deposits As loan impact by interest from interest growth rate increase offset from income, and well net in rates higher benefit as wholesale was and far the as funding. net the

together increased shares provision very in XXXX average X from and charge our offs $X.X continued points share We in increase net dividend with a credit shareholders. during XX% reflected XX reducing The year, quality basis level an low the to our Energy. and XX.X count with points in million we only returned repurchased or excluding solid basis by billion

earnings In summary, shareholder continue to value. enhance we achieved record and share per

XX% Fourth for our X. demonstrate earnings declines an nearly X.X%, $X.XX with ability were despite share. an These and returns ROE Slide quarter to of to of per ROA results interest in $XXX rates. solid drive Turning million

Broad-based non-interest management active to continued quality contributors deposits and income our capital and were growth, performance. credit strong positive

trends. growth inventory Market steady due Commercial their from Compared third was as Banker and remained activity. in to Also loans benefit National levels. by to as Mortgage quarter, lower general to partly continued offset was declines Estate Services This Environmental relatively as robust well Dealer Middle Real the expected. which average refi maintained

across and steady of with slow our I've expansion. tone and and see economic to had customers we The conversations colleagues is recent continue markets optimistic

launched of we a the cross-sale corporate and seek priority expectations past acquisition, We are over we year continue strategies experience focused raise on and employing have as to to what a make customer the can retention be. bank we that new customer

third mix loans non-interest coming business over with deposits. growth quarter relative line bearing XX% increasing relatively deposit from billion While The every robust, contributing. with was were slow, $X.X growth the the of was favorable almost to

$XXX million. nearly have we growth, In this conjunction with deposits higher by reduced brokered cost

X Our basis in points fourth deposit the XX cost interest-bearing basis declined points quarter. to

We to relationships. carefully and deposit we action are are recent taking we the rate with are cuts By competition attracting the managing pricing. retaining and our adjust debt monitoring closely deposit rates,

working growth. it our is is by clearly deposit Our demonstrated and strategy

in higher cost loan reduce XX%. funding points. allowed reduce wholesale basis deposit decreased to ratios Also, loan our us increase funding, The to helped our deposit relationship to XX cost total and to to

continue of include card that continue Of to note, retail recently exclusive grow, announced program deposits attractive government years. benefits to that Direct and our for a for processing the financial economics intermediary third-party the platform Treasury another U.S. servicing. leverage Express this will we program to the for five we and ability be The

interest primarily during and declined decline margin points of the loans As were rates of our income, net far driver to net Lower XX% income our tied resulting LIBOR interest to which XX-day XX basis primary quarter. rate over interest net as average the million, are for in a floating $XXX on X.X%.

January. We million added billion early swaps an October $XXX $X of in additional in and

closely remain to our consist only remained fourth the of with points. market taking time, impairments valuation credits program to as basis quality the build capital for hedging select opportunities net continued Credit monitoring of XX arise. of soft. is Energy as continue strategy on in charge-offs they markets to over Our quarter this advantage primarily strong sector and Charge-offs

more challenging gain well million decreased points declined derivative million. Healthcare from along our strong in other A total to with only We and of incremental environment. income, or the Excluding as were of offset HSA in million. in income customer the $X Non-performing rate Savings a charge-offs business, growth growth as and sale provision categories. Energy, the had net several basis XX $XX helped increase $X non-interest were only assets loans

buyback compensation, under flat, as primarily to CETX returned full line by for in almost million costs. This capital which share our We the higher we processing outlook remain through and We restructuring expected maintained target. our our provided and is provides million program. $XXX XX% dividends, X.X outside with related X% expenses currently targeted in increased return a repurchasing XXXX shareholders shares seasonal year to to Expenses occupancy. excluding

turn I'll to Jim. call the now over And

James Herzog

good Curt morning Thanks and everyone.

Services loans end to of Energy, Estate, to average Market X, were general commitments stable were and National as year, were quarter with Middle up as Mortgage & Banker billion. Market in last and in third Turning the quarter Curt Sciences. Equity average Real Relative stable Technology in in U.S. Services, compared in X.X reductions quarter Estate, Slide loans Environmental fourth offset Fund Middle with fourth quarter by and the Dealer. the and decreases Commercial Dealer indicated, Total Real general growth offset to Life by Commercial Banking increases

Our solid. pipeline remained

This of lower a month basis result in interest XX X.XX%, non-accrual million were of third primarily addition quarter an one points in rates, yields loan from Our decrease elevated quarter. level. a LBIOR third interest $X from to the was decline

on customer balances balances We three X.XX growth down increased details provides million interest higher of Slide million. increased brokered Non-interest bearing markets. XXX Average X.X with billion. managed X across bearing over billion our while deposits deposits deposits. costs all our XXX increased about

costs, we bearing point in As our far pay with decline deposit decrease quarter. with the end This deposit guidance adjusted had rates X Together achieved brokered the the rates, interest high we in as is deposit at the a costs. basis throughout interest provided. deposits in the previously of we decline

have is and recent our MBS As been yield X.X%. X, portfolio portfolio steady. Yields the on on the around held Slide you stable purchases can see on

the had this increase We back half have for relatively modest in not duration is year, small. significant our premium, impact in of prepays had the the which so a unamortized remains a on

negative factor funding of basis Turning the X is deposit The interest to interest X which from to net the to major had rates, points impact portfolios rates X.X%. Loans lesser X were loan points. fees. elevated but had rate interest $X basis the million margin. had by $X drag income Lower X adding levels, point margin lower wholesale points in A and and $XX million a was impact was resulted a points a basis million extent improved contributing million credit lower Also the in X. other XX or interest points basis margin. X $XXX decrease Slide by Net on a basis including impact point million and million the margin. on the of $XX balances, on reduced non-accrual decline million impact dynamics, XX a the lower cost the cost added lower to million basis $X had basis negative to and Fed an balances added margin. and margin margin. $X Higher or or deposits to $X

the In interest our September fourth the given net impact were very our of of income along quarter a rates the July our quarter. and primary the Therefore, impact driver quickly. lower full was of October's of with rate including loans summary, cuts, the priced net in portfolio, nature

lower of steady remain bulk believe us. rates rates behind we impact going forward, is of the Assuming

strong Slide Credit XX. on quality was as shown

points. $XX million Our basis charge-offs net were XX or

Energy, charge-offs million. only were net Excluding $X

to non-performing lowest assets only X% quarter since XXXX end. Total as of XX of loans declined criticized levels the points, of basis and loans one total comprised

of charge-offs impacted impairment and see Energy far Energy as Energy, of previous with million. select As the loans continue prices, to liquidating gas quarter than non-accrual well fourth few capital weak quarters, assets as lower in oil two as markets. Energy a were the we $XX loans by while decreased valuations volatile

remains have as healthy Energy Therefore, However, at our reserve seen million. migration increased negative moderate a increased we we very which amount Energy loans $XXX level. of criticized for a

of provision held million, steady and X.XX% decline $X million loans the of total for ratio from a reserve third in a at $XX resulted quarter. Our

our X, As implementation is been our virtually process of far has January of as complete. as and adoption CECL successful

short ratios. expect of in we be change portfolio X% to capital we relatively duration economic reserve little on a impact a a a fairly our have of therefore expectation and in X% commercially-weighted of benign decrease will Given environment, our a will

shown with credit derivative fees syndication million, the activity. on increased $XX $X adjustment. XX. income robust on rate valuation increased Customer million Non-interest $X impact including the as increased million Commercial Slide income lending

a impacting fees small in mix X volumes, well other government tax transaction merchant was We mainly fees million of as fees due including in of preparation investment This income $X card fewer the and the corporate days in a to received banking, fiduciary two volumes securities decreased also third brokerage partly categories cards in and by a quarter. crediting. decrease also as as business the result quarter had card offset shift in the increases million several

deferred in for cmop million. are as returns note, During $X the the expenses asset levels which quarter. quarter, a the million, offset same of business non-interest were third sold Of X we gain HSA our

Salaries of commissions Slide seasonal expense. result on XX. and expenses as performance million. benefits was This $X and as to increased higher well healthcare compensation to incentive a Turning tied

outside seasonality categories. other million addition, X and occupancy million increased a processing drove in as vendor transition fee, increase a several well $X expenses due In to as

below well manage carefully our is by peer for as we of to efficiency third evidenced invest quarter continue the ratio as We costs XX% of average. future, the which

In million we share on shareholders. quarter, or repurchased X.X million with we is under returned the shares Slide $XXX to as XX. $XXX shown million fourth program, dividends, our repurchase Together

capital Our continue to goal and to at CETX excess is ratio back maintain return XX%. approximately shareholders our

the Turning rate Slide to XX. environment on

estimated Assuming deposit of is at $XX million the the net net interest with remain first to levels, taken This income the on the rates. actions cuts rates the be effect fed impact our quarter. quarter $XX to rates fourth interest quarter relative the from recent current lower combined million includes we've to full to

Of vary such factors course movements. variety will a of LIBOR on results actual depending as

assets quarters of dated the and smaller rates expect as a steady, reprice. as effect held rates from if three relatively we remaining liabilities far residual see longer to As XXXX,

hedging continued negative have activity In a addition, could impact. modest

three with work our January. hedging in about and asset hedging time. portfolio $X.X We and over million steady billion Overall, average added interest in remaining and to building about are billion constructive our U.S. in our on moderate money. currently $X positive $XXX remain plan years an to we progress in October to early continue tenure We we We the swaps of have the in sensitivity. and economy, rates currently to make gradually portfolio

and our environment. outlook Slide continuation which XXXX, rate current the XX economic for of provides assumes a

business projected in yielding a expansion from auto as approximately X% continued to to in a by to National average in anticipate grow a XXXX. Banker decline in This most relative expect normalize We volumes expected Dealer is lines. reduction in slow, Mortgage levels offset to steady by refi We XXXX Services and modest sales. growth the economic partly reduction be X% elevated loans driven

to as business activity. be the a offset refi seasonality decline quarter, most mostly by due with for Mortgage growth we slowdown loan in far expect As lines Banker a will first in combined

We expect typical year growth have of We decline. we a average to deposit X%. seasonality normal through will believe quarter including first X% the the

and products retain and attract to offering along pricing. services by continue relationships to long-term is goal customer with Our superior appropriate the

absorbed previous on expected I additional on be expense year. interest have full of to an an mostly Also the is year of effect remainder modest quarter impact the impact. income the As with will the funding slide, wholesale for first discussed the the in rate net higher

we In million XXXX saw we decrease non-accrual is in net level charge-off believe continue $X offset. elevated resulting XX expect a basis Loan million addition, $X will growth a the similar to in expected point to interest to point provide to in from recoveries well, portfolio to basis partial our perform the range. XXXX. in We XX

cause January loan net in CECL current and provision we charge-offs new volatility as outlook. growth economic slightly new consideration expect the taking which should provision. the Given accounting backdrop, Xst that Note standard assuming our became may above effective standards, into this greater our are be we

growth fiduciary X% expect about we income, of card non-interest as fees. by far and led As

declines such as XXXX, totaled in $X and strong derivative warrant to it’s certain comp expectation hard to Also includes that categories XXXX and not deferred Our growth assumed repeat. million key predict customer income. in had which in it's

quarter, and income comp and dependent on of sale the far of therefore that as are the fees a conditions million, as deferred not the levels. the derivative keep As mind continue and market at fourth may all business syndication a in additionally well included strong these which quarter on gain HSA as of $X first

X% to expected year-over-year. are Expenses increase approximately

projects revenue are see implied. fee in We efficiency as related in expect outside our a execute processing growth investment to to and that and increase tied we income technology rise

In expect as merit, pressures and items such inflationary addition, marketing. staff annual we on insurance

offset of -- which due to annual result elevated rate, expense associated taxes, million. includes lower expected compensation and $X a expense increasing higher about to expenses. marketing are lower discount share As recall mostly seasonally first the and pension is payroll quarter and be Also benefits share occupancy by salary

of rate XX%. maintain our to is to as CETX be approximately expected effective Our far as approximately target tax expect we And capital, XX%.

call turn to the I'll Now, Curt. back

Curtis Farmer

A Thank you, outlook we've moderate U.S. for value the U.S. provided volatile and dollar The continued a headwind economy core trade. XXXX. remained for through Jim. our reflects expectations the strong of expansion

this of progresses. and or continue stable to China Canadian be the However, been the We such Mexico and XXXX agreements year uncertainty U.S. through that many interest as environment soon remains as and for looks and strong year labor trade resolved. accumulated may rate sources The have backdrop us ahead. customers consumer the in And sector. market our support will believe should benefit the the

With have Over maintain an better rate can our rate to mid through in or remain managed weather the are the economy we efficiency interest economic on controlling performance. our and to XXX many cycles. focused of we year XX%, interest changes our control in XXs solid history, positioned We nearly things we ratio the environment. and ROE

well to metrics grow expenses. maintaining and XXXX demonstrated controlled credit Our results ability our revenue favorable while

Our the key value. shareholder enhance to to strength continue provides long-term foundation

markets, fee diverse strategy expected with growth in income. is of and includes result to loans, which growing our Specifically footprint faster deposits our combined banking geographic relationship

maintain capital future. conservative, to discipline including consistent we to continue the credit has well. positioned banking approach Also as management proven us expense our for and We invest our

we would to Now, questions. your happy take be

Operator

Instructions]. [Operator

Our the line Ken will with first question from Zerbe Morgan come of Stanley.

Ken Zerbe

I just down read make first off trying way to NII. I to $XX The on I outlook. that to going be I to then quarter rate understand it of sure really is in $XX impact say million. is start here. wanted just negative terms NII what is obviously you're the And to want million

that growth NII than -- lower go dollar had net how a Thanks. quarter to in affecting from you offset then going subsequent first but you be XXXX quarter? like the that. throughout trying or So NII lower factors to throughout quarter if basis say the of Are asset each presumably dollars different the have do you year, see to the the is impact first all after you

Curtis Farmer

want to you Do it, Jim? take

James Herzog

question. Yes, the thanks for

we be as $XX quarter. mentioned and from the $XX will first lower impact in amount to smaller progressively We a the will much million quarter. million in through second see the year rates the go I It

impact $X quarter, might we third be even to will it now Then it negligible it call the we closer to I've of in of to extent though the And number year. depending some the million $X As will a course, rates mentioned there, see have all the on becomes obviously the have and through the fourth way hedges that also. million impact range. and an

me XXXX. as you the that non-accrual up XXXX volume and obviously impact heard to compared goes the on, overall impact We'll be pick year will an mention on the

Ken Zerbe

the to do ‘XX, higher guess first detailed fourth you I be sure for is if year. quarter -- your look of The to because very going the -- NII right I'm Is lower than say guys you that that modeling 'XX? or it at assume Sorry. of

Curtis Farmer

volume You to beyond rate quarter, get once overtake we question. should see the first answer your

impact that of impact right, decline. step volume to and then And does the rate to rate you're up starts first most the solid So quarter. start is in

you to into the you So third second a see start crossover get once quarters. and

Ken Zerbe

Alright, second Got -- guess question, terms in helpful. income. I okay. maybe just guess you, of that's fee I

on that You that's is the you growth if than No no part of that, compensation And guess assumes your and assets. possible right guidance you is that I get of at mentioned assets? fee assumption essentially those X%. X% returns I do kind on -- that Can word? is starting returns what more deferred the in just it think explain your

James Herzog

of wild growth comp. returns market It Well card. on depends the the obviously deferred a market comp on is bit the and

be negative. positive So actually can it or

So return very to to any be there’s be hesitant going assume I there. would of kinds

direction. other it fact go the In could

Ken Zerbe

understood. it, Got

last just sneak if then in. one one I -- And Okay. can

a your growth, obviously of X%. X% terms loan In or

interpretation talked to of presumably quarter GDP. quarter comment, any expectation your my last last around And loan you're growth closer I I are some Can Thanks. and versus mean you weakness you X%. for GDP this or you of was something that? nominal about seeing weakness think just guess what's kind deterioration? driving nominal I in seeing quarter

Peter Sefzik

Peter. This Ken. Hey, is

we've X% I think good communicated, X% about. to the we that feel

ability some little X% in seen good There's listed communicated. Mortgage. have that of to our seen going interesting we But in we've timing we accomplish a we’ve bit fourth I where the slowdown what of We think had the the been and businesses that. we've a Dealer feel And on quarter. XXXX, X% that to about into sort

Operator

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

John Pancari

on also topic. then And NII the

So, guess progress in the incremental third I it we fair probably move then, fourth or the quarter. help interest implies got this about compression should And some beyond Is that? from in assume second, quarter fourth and through outlook incremental as we how margin Thanks. the compression that to margin some of you -- talk can there XXXX? net stable

James Herzog

Okay. to that. Yes, happy answer

in each net against couple that first the to a guidance have excess that’s we to and that did you're note offered X after netting the will that. the We compression that and in quarter, $XX due of I bps of We fourth that other. against that the quarter, factors going the to have be you million balances, million $XX about smaller saw progressively amounts liquidity higher

imply simple it through the a math And if to on do reduction you would modest from current so, 'XX. the that,

based Having our by is excess very always customer it guidance provide hard impacted which that, so because going said profile on to NIM we're predict. just liquidity, is to percentage

John Pancari

you have pulling mentioned any you the talk it tougher guidance indicated Can part leverage about outside expense maybe and you comments look you processing can your as then revenue. revenue the related by the impacted expenses -- you is? backdrop and fee at expense you about given talk seems expense your your outlook on for revenue is that even like XXXX And side? on consideration too in expense may back what that to front, you incrementally harder what higher separately, then And Thanks. in

James Herzog

have XXXX. fees, in line core good growth items we processing to some actually do Yes, very number in specific so a outside the of

One with of course, have And that. is processing those we fees of card outside income. associated

about have that card item we bonds, offset that mentioned, and or items XXXX associated core I year course talked just will strong by that these fees some some is and we the we syndications, the we But some outside will strong of be comp deferred Now, saw of of we year, item there growth earlier. in very the line had have processing with the strong derivatives that. with

where And should expense regarding pull always focused your question on back, are very be second on we control.

mind in position from I sure of in important that the proper to it’s again strong investments ratio, it moving a needs and feel the we're in company think we but to forward have to technology XX% to make terms pushing starting we very where of do that keep efficiency be. make we're

we pulling in on invest back going to at in this So are that anticipate and time. point continue to technology don’t

Operator

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

Steven Alexopoulos

on first follow-up question To on expenses. John’s

the increase Or So XXXX, reinvest? if I run that's as out? million? like to at a for in you is you anything sound there look pension rate was call X expected continue mean, here, would the do X% you unusual you company good think

James Herzog

Yes, usual normal item the only would be say including pension would growing the largest merits inflation, I be there. item. would

too terms up unique nothing expense base. that what makes So of in

focused bit going forward. strong with What forward, is a have where a in leverage some rate. of hesitant do focused really on more as headwind and the of call some Going the be and of operating that we to really We operating to income transition we're get future. talked we earlier. here on I'd run we're really about expect the a expense positive But that's pension non-interest leverage,

Steven Alexopoulos

And looking strong up in color color, was so the put was you more it why really deposits in strong? just growth for on I corner. Give guys more

James Herzog

pleased We're brokered quarter. $X.X strong billion. talked ran mind, with We Yes, about very $XXX up CDs. million we in it keep was We of about being it. a very off

so are the it $X.X billion is, So I deposits. at actually or about look we way up in

relationships where These effort out are a were we we deposit So gather, standalone needed to were poured go bank, of that we It's these have the reprice concerted very into appropriately none there. very deposits. pleased to. and

But least half this say at bleed first half Now, to might half, from I quarter. that a hard tell will seasonal. money can And it it's always what approximately this little the minor maybe think during and of is when even year, probably of But is there us will tell with is we that if in I is component a decline the first a the see core quarter. seasonal. I stick strong through out

Curtis Farmer

is had we've to it’s add, acquiring program deposits This and right strategy that that our strategy existing additional relationship talked think made But that a longer the customers, new chase leveraged approach. relationship consistent for acquisition I programs around try about. and of which place in hot not is our our might the component based sort us to Curt. heavily pricing client like Steven deliberate Jim the We've money or and with transactional deposits. CD very from term deposit I

Steven Alexopoulos

curious, just you're actively are about something got attention. one. acquirer targets Curt, longer I'm final quite Maybe with this really conversations one bit or your Comerica you of a Thanks. the term? just comments having being recently of thinking is over in potentially

Curtis Farmer

is little Steven, Yes, I in think written that were there that think our the are change say is no been of of if misleading. has headlines bit strategy. text a thing on read maybe, a any anything few that I me, you There would I maybe first

makes one what and look that sort that and outperforming if something on that that lens right focused day been growth a on fairly during we in fit. I the time. But there's focus and said good done shareholders, we very narrow are we’re We company out for to economics take we’ll as and organic of is sense is major strategic what in We've day metropolitan be a so the areas a XX for said we and years would major and long two and And have Texas California and organic continue at. for last of our our growth. acquisitions

Operator

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

Jennifer Demba

A driven. quality. loans increasing It like Energy looks question on criticized was the asset

sector in portfolio? this And seeing will that any charge-offs sector you if think weakness other Thanks. higher year underlying Just you your lower? other guys or wondering be any in are in

Curtis Farmer

Pete?

Pete Guilfoile

Jennifer. Yes,

XX X So a points basis basis only points you we're if ex-Energy charge-offs. points And guiding of think to that’s at take XXX basis don't charge-offs. XXXX, We sustainable. in look

So Energy slightly we that fully charge-offs. or would lower what be ex-Energy hopeful least that that, higher could than partially expect we we're would in at charge-offs see saw XXXX. we And by offset

outlook. we where get think the that So we that’s

Jennifer Demba

Okay. Are weakness Pete all or this geographies sectors any at in any seeing at other point? you

Pete Guilfoile

No, we're ex-Energy in points only and of in really fourth the not. million X basis $X quarter. charge-off in XXXX ex-Energy net charge-offs

are Our that levels Energy. levels includes and at very non-accrual low

$XX strength, lot So of a the particularly is of seeing that we're a in billion portfolio ex-Energy.

Jennifer Demba

other One Okay. recently. question. transaction Texas announced saw in And major a we

disruption you if wondering transaction? guys that merger Just are expecting from any opportunities Thanks.

Curtis Farmer

organization. And that different are in disruptions general our as strategically there’s and markets we focus occur, have Jennifer when I occur that in some a number customer occurred. some of always transactions an but there's nothing different would that segments say focus in I and changes that transactions think

Operator

next Wells securities. Your of Fargo with Mike Mayo line comes question from the

Mike Mayo

spending How areas it focused? So much are will how much do was your technology spending technology year? of increase? the And what you last think

Curtis Farmer

you the Jim, in add that Yes. and then around of areas start on some of I'll want focus.

James Herzog

number spend a -- strong in XXXX. the we implied XXXX and say over we falls technology expense have spending don't bucket. do a in beyond increase technology modest for the in it's Yes, Mike. have in in expense apples-to-apples defining I technology work the simply as challenging other We exactly a XXXX, But and quote because so banks specific in with will to an difficult get what outlook

something So that it we is continue to invest in.

Curtis Farmer

a technology we've the year overall some of our before I from an several initiative of talked many spend. applications Mike, that, might the about us rationalize last add to having work well platforms. to of And lot and years that our just We aging positioned of did

areas leader servicing applications. servicing our has XXXX work us the in done helped interfacing then and And months free In And for for projects. especially platform, of side lot online them a and we a new will to including number last capabilities our a center then their major a major digital in to portal tablets the has new the cloud been upgrades servicing wealth related on platform be and banking major customers capacity all upgrades data non-customer on upgrades key call of terms the treasury more XX of our the and that to CRM upgrades in prospects in area, the included clients. ATMs, make analytics in efforts, pretty for banking fairly loan employees company upgrades for and we've consumer your think investments up new items new then in with of that I as help migration, mobile us a coming enabling management as well infrastructure of have to and for focus our around marketing clients, and management our platform, origination center technology. for of across center, our the boarding the to selling to company-wide payments technology our that and major significant

to providing feel most category working like I put in we really focused to continue roadmap have colleague we a on on. But customers. experience a that term and customer in we good we our enablement. be to institutions, of well like would positioned we're relative So, our things competitors very are And longer

Mike Mayo

you assume vendors always guess I balance with the one many with to the a you help transition then getting costs? place facilitate to transformation. follow-up. this And vendors you have took transition. you What vendor I employed help

On there's had always in during risk the of quarter vendor lock this a transition and cost. the you vendor other hand,

too that the the analysis vendors? vendor So company transforming versus can you lock goal into the goes prepare How much describe you of faster? selecting against in

Curtis Farmer

I question, a take your quarter. it more in for and the then the the the of specifics We turn do around second like key vendor going institutions. expense will to the of Jim relationships I'm part of to sort number have most

in point Given try we trying the any we we terms issues that we've makes between good of one and where through that go the capabilities, to we do really proprietary something single of to in-house and to servicing try fiber process size And are, of third-parties get building sort we right organization believe including oversight senior vendor. we oversight. good leverage or if sense. same third-parties balance gotten with robust were exact can and we help leveraging concentration relationships Those it something balance as

want maybe the talk quarter. about around you Jim specifics So to the

James Herzog

there about Yes, size actually vender unusual I nothing this real say than the other that transition. would was

cost ourselves evaluating it's This We to was unusual the vendors one not for larger. something vender larger of was looking than But And both just quality we're have a always in terms both a this and one-time on are transition. typical, and bit not is little evolving It's right thing do our unusual. and it's that I at for that us saying customers. that’s always a capabilities. to cost

a We really sometimes vender within transitions have every times multiple year year. and had

there's think more probably size. not other the lot I a So, that to than

Operator

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

Ken Usdin

cost A side question on the deposit of things.

resetting natural base, what about You of across would have happens mentioned in saw here else point decline what a in versus much just more be wondering continue stable you as environment? to costs. customer have basis you’ve the you the just deposit the that here from do to negotiated X talked Thanks. in past? with How rates in from costs And

Curtis Farmer

Jim?

James Herzog

answer Yes, mentioned. fourth I happy reprice throughout as quarter We did the to that. deposits

being a smaller thus I’d points efforts lower-single-digits the quarter there. X of though as amount the continued undertaken bps see we saw first in characterize that just out in based play I to-date decline bps. things even quarter, we be the the kind in will quarter. on first where The change we'll would basis actions based far. fourth the But saw off in a expect of the decline quarter it X probably the of So, fourth taken the

priced the accounts. further but did -- a probably shift some that little mix of higher that One is, see bps quarter. imply took see some actually fourth caused of that relationship or two to actions some things reduction. we larger did three things in quarter related two fourth the deposits a our The in we would reduction The the grow

I not be on the that mix what that depends some tailwind. would competitive of landscape. wind competition could say and shift happens really whether So be and but remains a seen in to And or

think affects I we're picture of funding. be the for it for a larger true that. Comerica, from specific of there in I the follow and leader think turn loan the demand entire industry driven not out That’s in pricing. seen the that deposit but bit And I've by industry, will little immune certainly growth terms to

So we'll continue our right for and thing our for to the do balance sheet. watch the landscape competitive customers and

Ken Usdin

And years sitting one you and just XXX deposit cash in more unfortunately growth a so. up question this just on the ended have, lot of mix still of XX or good earning assets. that With it all

cash into given growth book hangs how this just sort back So if deposit of time? you think or does around, it or over book an versus do of security the it in stay of sort much or securities not do about optionality you flush continues

James Herzog

these deposits we falls late do of in as typical to QX QX we in expect and mentioned seasonality the the seasonality. factor Well, some QX

and the extent to have liquidity depends would we interest really remains seen. So we how the liquidity I do liquidity, excess have be say on excess much To landscape. it rate

securities point size book we is with of up the time. monitor, but In lot liquidity this to our we tying happy anticipate in a size in flat there's And at growing of would continue not enough percentage That’s at I curve general, will time. something that our in not point securities this in portfolio. the terms are that of

Operator

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

Erika Najarian

poor or given operating to pull earlier look have to 'XX, But NII, levers revenue out I your that's XXXX, on more to the to more 'XX into there's it we difficult. for lower the be growth you at Obviously, obviously least Steve’s follow than in just wanted growth? less than as the to message that flexibility up is leverage. X% expense to response quite question comparison

Curtis Farmer

I at company, that especially this had expense our is history Erika, Curt. you of say have the year, discipline. when look would definitely we a proven last the

and reports, everybody them near the You top efficiency especially once the that peer at of group peer the metrics our top are at our expect performance to of be we the group really look ratios.

term are our So good We job us XXXX There customers at in focused to appropriately and to to to expect pull. that grow remain and we thing always we the positive can longer institution. know strike focused help investing levers should dynamics longer But are in that don't to how to and to few leverage going on to we believe operating remain additional serve there's manage for balance expenses. between We you continue striking and right are the between need in the that balance and worth expenses for And the our do, very side numbers. the those We've to technology it's and term things Jim expense play a history. right our the things talked expense a sometimes that management. on right that in nature. invest customers investing we done managing about. again, that strategically of in And overall

Erika Najarian

my back with worth $X.X in the target, buyback of think Got it. just stock, really should which fed times. in And when a basis And almost XXXX? three points cut ratio about CETX we second the is, billion question helped bought you year how above XX appetite

Curtis Farmer

Jim?

James Herzog

to can. ballpark generation. support earnings to simply to or is come in it’s quarters. then us simple calibrating we're been the And I need growth, as dividend target And XXXX. what for our and that -- pretty that would against And we've our terms a of that two plus we XX% last in simply close throughout we calibrate XX% minus we for for anticipate as Yes, support staying loan goal

Erika Najarian

a question. as follow-up just And

look every investors larger actual of can maybe us peer quarter. what just a I'm But the the you binding could capital? above what at of points your if much XXX remind it's on lot basis us banks. constraint is some regional lot CETX actual capital and targets of I remind sure or constraint? think I your a ask But binding you you Because is this

Curtis Farmer

at a looking there's of ways couple Yes, that.

from would be And customers. pure the agencies, the at it. way CETX is, stack. looking is it standpoint, X. don't of binding Tier we're there's and from look a stress the constituents And conscious referred ratio But important our obviously a in rating it our constraint too. you that of always We testing very standpoint that If another at regulators, have

It say what not I'm to just trying one depends it there's from. perspective constraint. So you're at looking binding on

Operator

James. of line Michael from comes the question Rose Raymond with next Your

Michael Rose

lot Just revenue as of just we there of Is Thanks. kind front of of talk profitability and ROI the the expenses loading ROE, this environment? to about the expenses, on been intermediate the call. term think efficiency the technology the given some any change expectations a in

James Herzog

stay double-digits mid double-digit be We've Interest ROEs. mid enunciated range And low impacting of expect future. drop to significant in we in in the the -- clarify, sorry, to will we We double-digit rates to in be No. past could that and be low just driver there. I'm to to a low that foreseeable more ROE. expect a a the

going So But at we'll double-digit see we go. where feel good this so. point, those pretty ROE the about forward

Michael Rose

Okay. And then just one housekeeping question.

look at I when is I Thanks. of look commercial when bucket? much the actually Energy that NPAs, Just the how versus at non-Energy

Curtis Farmer

Pete?

Pete Guilfoile

I It’s XX. the think. for I Michael, don't have Yes, Page don't you. breakdown

million XX ex-Energy. million in So XXX Energy, in

Operator

Your Davidson. next D.A. of the from with Gary question comes Tenner line

Gary Tenner

one questions, on the couple have I Energy a bucket.

As seems of in and and curious pretty you with XXXX? this be Services what challenging quarter still in the gave segment, decline your in Dealer Mortgage. for new for what you space a significant in that guidance highlighted that to outlook is I'm in for loan apatite kind E&P, the XXXX, obviously growth lending a

Curtis Farmer

Peter.

Peter Sefzik

Hey, is Peter. Gary. This

will a opportunities, We're lot our So, I flow. I in. we that you that deal but mean not that appetite more this are limited seeing tell environment for is they're still of looking in whole we're

there’s and We the are lender relationships. We've good very make space. really got going pursuing space. we're lot be in to extent sense to opportunities new coming the the us, Not we're our seeing energy to consolidation a of in that We're a But continuing for support into capital them. customers it. important

Gary Tenner

line on the HSA I assume with deposits that were businesses. business, secondly then there And of associated some that

just what you So highlight can amount was? the

James Herzog

won't negligible. for dial us. the business That's very This They is Jim. deposits move a small scale even Those were whatsoever. fairly

Operator

Wedbush the from comes question of next Your with Winter Peter Securities. line

Peter Winter

Because in weakened a gives X% to XXXX? first Just start wondering, from seemed at X% bit loan drove I'm is what to to little of it that? wondering, the loan kind quarter I growth update. looking off growth, average flattish. And the was just And mid you going confidence the what quarter of have

Pete Guilfoile

Peter, it’s just remind you would again. Pete. I

saw we loan it part really saw to perform first the really the think second Michigan of nothing into well. really concern middle market year, businesses. where year-over-year in the California year across last felt growth, continued in middle good year, of kind And if X% half got For we loan that most really little overly we bit, we the of. little good had but market. a growth our and down Texas a of of bit In I slowed

look year, So, pipelines we about market good feel we feel markets in those next our and middle specialty businesses. as our good we go and really like into

end Again dial we the still bit X% like of Dealer quarter. business into a to really XXXX. And see about we of communicated. feel dialed back a we're good feel at the be EFS that able bit, in little those going to to did achieve but Out back little that X% we've going

Peter Winter

to of right? is in million. that think $XX income $X note, separate $XX quarter a Is for that include Okay. I just one The one million housekeeping. day $X about And first not which to then, non-interest count, on less guidance does down the million, million

James Herzog

we correct. $XX Yes, on impact million we $XX mentioned rate is That to the and simply million. guiding were

are So right, you there be will day the absolutely one impact.

Operator

Capital Your Markets. from the line next Chan BMO with question Lana comes of

Lana Chan

growth the just driving One The flat kind was What's the on in fee in fiduciary of XXXX side. I couple growth in XXXX? it for of income a side, cleanup expectations questions. XXXX. from expectations

James Herzog

Yes, it’s fiduciary specifically?

Lana Chan

Yes.

of I of think fiduciary. in fee income one XXXX, drivers that the and the growth was card

Curtis Farmer

serving business business a that we in and a would U.S. provide have of then who well. fiduciary. we the trust larger trust many services the business for And where One, we institutional couple clients time the platform trust a in a as existing scale which things there’s in our Yes. a for related have long been that’s I say we've in to are broker-dealers third-party

number of one growth we optimistic Fiduciary sort have of normal customers. see We and XXXX, markets with the a on by nature flattest unusual those The in we so kind opportunities repositioning of is that of and and across there. bond the different is also so business for a various growth of we outlook But grown XXXX. And nicely did that see all nothing some XXXX. impacted market of would have that’s time buckets. over equity those categories

Lana Chan

have remind a ratio? question you the me, And can payout dividend target second is, do you

James Herzog

not. do We

we goal the dividend Our high is consider normal payout the right simply somewhat That's is. a sustainable. be I’ll too where with want really what our dividend to to you make income which is don't get that ratio stream, our focus And call now. income it normal sure you obviously if stream have to

and with it and sustainable simply comfortable is strong right we're So now.

Curtis Farmer

we've so to the very growth slow we've year. Lana, four to out focused rate return nice just to the of five years, start in for been expect that. in in and add the to last to growth you’d or had dividend that. dividend our shareholders, Obviously And very on

Operator

Vandervliet with the comes Brocker next Your of line UBS. question from

Vilas Abraham

This Vilas Abraham is for Brock.

give quick a specifically portfolio? day two could more to the that if Who as you Energy the a impact. it Thanks. color bit little Just and are maybe relates on just on thinking question about you CECL, guys

Curtis Farmer

factors. how is, just not Yes. The forecast the -- but impact at economic Energy, One have different of it’s impact to our couple regard day would specifically. to economic look two we Energy with the a forecast

incurred the don't would our it we model so be and to CECL expect under larger reserves what would And would incurred we any we in like with the growth would degree under would it model. just modest see there that than be that impact expect be but

Operator

Executive and now over Officer to back I'll turn Curt call President remarks. further for any Chief Farmer, the

Curtis Farmer

questions. appreciate we very good the you I in interest your call joining for We want and Thank day. your to our Have appreciate always, thank a you. company As today.

Operator

conclude this gentlemen, you And and for Ladies will call. now may disconnect. Thank you joining. today's all

Comerica (CMA) 21 Jan 202019 Q4 Earnings call transcript