Comerica 2Q16 Earnings Call Notes

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Comerica (CMA) Ralph W. Babb on Q2 2016 Results

We must earn our right to remain independent

” As I have indicated previously, our board and management team are committed to evaluating all opportunities to enhance shareholder value, and doing what is in the best long-term interest of our shareholders. If there are strategic alternatives that are realistic, achievable and will maximize shareholder value, they will be fully considered. We know we must earn our right to remain independent.”

Performance of oil and gas portfolio has improved

“Overall, credit quality was solid and reflects declines in criticized and non-accrual loans as well as net charge-offs. This was a result of the improved credit performance of our Energy portfolio. Energy loans have declined $356 million or 11%, and commitments have declined over $600 million or nearly 11% since the end of the first quarter as our customers continue to take the necessary actions to reduce their bank debt. We have completed 88% of the spring redeterminations of our E&P customers, and borrowing bases have come down about 22% on average. Criticized Energy loans have declined $281 million as of the end of second quarter. Energy charge-offs remain manageable and declined from the first quarter”

David E. Duprey – Chief Financial Officer & Executive Vice President

June was a record month for mortgage banking business

“summer home sales combined with the decline in mortgage rates made June a record month in our 50-year history in the Mortgage Banking business. Likewise, quarter-end loans were up $1 billion over the first quarter, with all the same drivers.”

100% of non accrual energy loans are fully current

“Total criticized Energy loans decreased $281 million due to decline in outstandings and a small number of risk rating upgrades as our customers have reduced expenses, sold assets, and tap the capital markets. Also noteworthy is that, 100% of these non-accrual loans are fully current on interest payments, including the nine loans we have in bankruptcy. The reserve for Energy loans is over 8%. And remember, those reserves may not turn into ultimate losses. ”

Curtis Chatman Farmer – President

Outside of energy the Texas economy is doing well

“Yeah. I would say that, overall from a Texas perspective, as we’ve said in the prior calls, it really is a scenario where you sort of draw a line down the middle of the state. There are really two economic factors at play or two economies at play. The Northern Texas market continues to be more diverse, more robust from a growth perspective with still net new jobs being added, much more diverse economy overall, less Energy dependency. And we are seeing still good opportunities really across all of our lines of business, Middle Market, Small Business, Commercial Real Estate, et cetera. When you look at the Houston market, certainly more impact from Energy overall, and Energy-related exposure. We continue to be a little bit more cautious there in terms of new originations, but really have not seen a lot of deterioration outside of Energy in that portfolio. We continue to watch CRE, but have not seen a lot of deterioration there either, and so, in balance, the Texas economy, much more diverse than it was during the last Energy cycle”

Peter W. Guilfoile – Chief Credit Officer & Executive Vice President

A little bit of migration in CRE in Houston

“Yeah. As Curt mentioned, we’ve seen just a little bit of migration in the Commercial Real Estate portfolio, but nothing significant. Rents are down about between 10% and 15%. We’ve stressed that portfolio up to 40% decline in rents average. Stress has been about 27%, and we don’t see any losses there.”