Specialist
Former VP at Comerica Inc
Agenda
- Operating environment for Comerica (NYSE: CMA) amid ongoing deposit outflows from regional and community banks
- Comerica's deposit base and exposure to duration risk fueling liquidity issues
- Expectations for lending pullback – potential impact on NIM (net interest margin) and operating cost adjustments
- 2023 outlook and industry consolidation
Questions
1.
Comerica is getting pulled into a lot of the recent developments with regional banks. What are your thoughts on the current operating environment for the bank and how it’s changed over the last two weeks, pulling out 2-3 key trends or drivers we should be paying attention to?
2.
You think it may have been a little unfair for Comerica to be grouped in with the other regional banks. Moody’s recently placed the bank on review for a downgrade. Do you think that assessment is also unfair, or is it valid for us to have at least some concern?
3.
Is it safe to say Comerica and its peers got too comfortable with the low-rate environment?
4.
In light of recent events, how would you assess the quality of Comerica’s executive and risk management teams? What’s your take on how reactive they have historically been to risk?
5.
What is the composition of Comerica’s greater deposit base?
6.
It seems as if we’re seeing banks with a similar tech or VC life science group fall either in the camp of deposit outflows or elevated deposit inflows coming in from the closures of SVB, Silvergate and Signature. Are you placing Comerica in the outflow camp?
7.
We see players such as Pac West and Western Alliance reporting deposit inflows. Why are those two players attracting deposits vs Comerica, who is of similar scale and size? Could that be attributable to a relative lack of lending? Are there other reasons? Could you identify the differences in performance across Comerica, Western Alliance and Pac West?
8.
Where would certain deposits head to after leaving the institutions they’re at currently? Would they go to large institutions? Are you grading these deposits as less sticky, given the inherent nature of their industries?
9.
Comerica projects its deposits to decline by 9-10% in 2023. From where do you see those outflows concentrating? Is that a legitimate decline projection, and what do you think the bank would need to do to incentivise new and old depositors?
10.
You mentioned the tech and life science group comprising roughly between 8% and 10% of Comerica’s total deposit base. Do you see the bank looking to reduce that ratio? How do you think recent events are necessarily impacting its decision to concentrate on one specific client base group?
11.
If we continue to see outflows that Comerica is projecting, what options might it pursue? Do you think this will cause the bank to for-sale any of its assets or otherwise seek to free up liquidity through Federal Reserve routes? What might its next steps be, if and when outflows continue?
12.
Being perceived as tapping on Federal Reserve options can act as a prime signaller of risk right now – we saw Pac West’s stock drop after announcing it was able to secure liquidity, even while avoiding a dilutive capital raise. Do you see a possible announcement that Comerica is taking that route elevating its perceived riskiness?
13.
How would you describe the composition of Comerica’s lending portfolio?
14.
How concerned are you about Comerica’s CRE [commercial real estate] exposure, given significant deterioration in loan-to-value, anticipated defaults on many CRE payments and the deteriorative nature of CRE?
15.
What proportion of Comerica’s CRE portfolio is for office, multi-family or industrial?
16.
How do you expect Comerica’s loan loss reserves to trend as it tries to position against losses?
17.
How do expectations for further deposit outflows, pullbacks on lending and increased loan loss reserves play out for Comerica’s anticipated NIM [net interest margin] figures in its upcoming 2023 earnings report?
18.
How do you think Comerica will look to manage its capital efficiency ratio, if margins are looking tighter over the next few periods? What adjustments might the bank implement to save its bottom line?
19.
How has the competitive landscape changed for Comerica and its peers? What do you think the bank will do to try to reposition itself in this landscape?
20.
We’re seeing a lot of smaller banks encounter an existential threat while experiencing deposit outflows with few levers available for reversals. Do you think Comerica is in any position for M&A?
21.
Do you see any potential bolt-on acquisitions coming into play? Would those be focused on the Texas market or in the growing geographies you mentioned, such as the US Southeast US and Colorado? What AUM [assets under management] size (audio distorts 55.58) profile or service base acquisition do you think the bank could be interested in?
22.
What’s your 6-12-month outlook for Comerica, detailing your expectations for a further bank run and whether you anticipate elevated concern for the bank, given expectedly negative earnings results in April 2023?
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