Comerica 4Q16 Earnings Call Notes

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Comerica’s (CMA) CEO Ralph Babb on Q4 2016 Results

Expect loans to increase in line with GDP

” We expect average loans to increase in line with GDP growth. We expect loan growth in most businesses led by middle market, commercial real estate, national auto dealer services and technology and life sciences. If oil and gas prices remain stable at current levels, we believe energy loans should continue to climb, but at a much slower pace. Also, we fully intend to maintain our relationship focus as well as loan pricing and credit discipline.”

Worst of the energy cycle is behind us

We expect our provision to be lower in 2017 as we believe the worst of the energy cycle is behind us. Assuming energy prices continue to be stable, we expect non-accruals and charge-offs to remain manageable.”

Inflation pressures expected to impact comp and marketing

“Inflationary pressures are expected to have an impact on annual merit, staff insurance, occupancy and marketing. In addition, technology project expenses will continue to rise as we invest to meet customer demands as well as continuous enhancements in our cyber security.”

If you’re growing loans faster than GDP generally there’s going to be an issue/strong>

“Well, to the extent we are using the current line to be looking back over history, that’s a good way to look at growth in loans versus GDP. And our experience has been if you are outgrowing that substantially, then that in general causes an issue, whether it’s from a credit standpoint or a business standpoint and – but there will be variances from GDP at any given year as things begin to pick up. If the things that we were talking about and Curt was talking about moving quicker and things accelerate, then we would expect it to outpace GDP, I think that’s fair. Dave, is it not?”

Dave Duprey

Growth in CRE slowed

“Finally, the strong growth in commercial real estate earlier this year has slowed as we remained focused on well-structured, attractive opportunities with existing customers as well as maintaining the diversity of our total portfolio. ”

Would have to write down deferred tax assets if there’s a tax cut

“this would be a one-time adjustment, but remember, we now have a net deferred tax asset and that net deferred tax asset is recorded at 35%. So to the extent corporate tax rates decline, you have to write-down that deferred tax asset to remember the new corporate tax rate would be. That’s a one-time item, but there is significant moving pieces. ”

Curt Farmer

Customers more optimistic, California leading the charge

“Well, I just would echo what you just said that we are starting to have conversations with clients that are indicating they are more optimistic business owners around possibilities of increased economic growth and maybe some tax relief or other things that might come with the new administration yet to be determined. And we saw that some activity in November and December kind of heading into the end of the year. As Ralph said, all three of our markets, I think, remain fairly robust. California would lead that charge and the high-tech sector, I think after maybe pausing a little bit in 2016, it seems to be coming back at the year activity, etcetera, the California market, real state values remained strong in California both in Northern and Southern California.”