8-K: Comerica Reports Full-Year 2024 Net Income of $698 Million, Resumes Share Repurchases

Comerica announces a net income of $698 million for the full year 2024 and $170 million for the fourth quarter, driven by enhanced liquidity and strong credit quality.

Summary

• Comerica Incorporated reported a full-year 2024 net income of $698 million, or $5.02 per share, and a fourth-quarter net income of $170 million, or $1.22 per share.
• The company enhanced its liquidity through lower wholesale funding and favorable customer deposit trends.
• Comerica maintained a strong credit quality and capital position, resuming share repurchases during the fourth quarter.
• Net interest income for the full year was $2.19 billion, compared to $2.514 billion in 2023.
• Noninterest income for the full year totaled $1.054 billion, while noninterest expenses were $2.307 billion.
• The company's estimated Common Equity Tier 1 (CET1) capital ratio was 11.89% at the end of 2024, well above the 10% strategic target.
• Average loans decreased by $2.9 billion year-over-year to $50.979 billion, while average deposits decreased by $2.1 billion to $63.901 billion.
• Net charge-offs for 2024 were 10 basis points of average total loans.
• The company repurchased $100 million of common stock (1.5 million shares) in the fourth quarter and declared dividends of $93 million on common stock.
• Share repurchases are targeted at approximately $50 million in the first quarter of 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company faced challenges such as decreased loan demand and net interest income, it demonstrated resilience through expense management, deposit growth, and strong credit quality. The resumption of share repurchases and a positive outlook for 2025 contribute to the favorable sentiment.

Positives

• Enhanced liquidity through lower wholesale funding and favorable customer deposit trends.
• Strong credit quality with low net charge-offs of 10 bps for the year.
• Resumption of share repurchases, returning capital to shareholders.
• CET1 ratio well above the strategic target of 10%.
• Net interest margin increased in the fourth quarter.
• Successful execution of expense calibration efforts.

Negatives

• Loan demand remained muted throughout the year.
• Average loans decreased by $2.9 billion year-over-year.
• Average deposits decreased by $2.1 billion year-over-year.
• Net interest income decreased by $324 million year-over-year.
• Noninterest income decreased by $24 million year-over-year.

Risks

• Ongoing volatility in the rate curve.
• Uncertainty about the future of the economy.
• Potential for customer profitability to be pressured by persistent inflation and elevated rates.
• Potential for credit migration as criticized and nonperforming loans normalize.
• Impact of changes in monetary and fiscal policies and fluctuations in interest rates on deposit pricing.
• Cybersecurity risks and heightened legislative and regulatory focus on cybersecurity and data privacy.

Future Outlook

Comerica expects broad-based loan growth in 2025, projecting a 3% point-to-point increase (Dec 24 to Dec 25). The company anticipates a net interest income increase of +6 to +7% in 2025, including the impact of BSBY cessation. Continued credit normalization is expected to drive net charge-offs at the low end of the normal 20 to 40 bps range. Noninterest income is projected to increase by +4%, and noninterest expenses by +3%. The FY tax rate is expected to be ~23%, excluding discrete items. Comerica expects to maintain capital well above its CET1 target of 10%.

Management Comments

• In 2024, we took steps to further enhance our strong foundation as we improved our capital and liquidity positions while demonstrating credit and expense discipline, said Curtis C. Farmer, Comerica Chairman and Chief Executive Officer.
• Although loan demand remained muted throughout the year, our deliberate deposit focus drove improved customer balances, enabling a meaningful reduction in wholesale funding and benefiting net interest income.
• Successful execution of our expense calibration efforts demonstrated our commitment to driving efficiency while creating capacity for strategic and risk management investments, and credit quality remained strong with net charge-offs of 10 bps.
• Despite ongoing volatility in the rate curve, we grew our book value and resumed returning capital to shareholders through share repurchases.
• In the fourth quarter, we continued to see favorable deposit trends with higher customer balances while strategically managing deposit pricing.
• As expected, loans were pressured by paydowns in Commercial Real Estate, but we saw promising signals across other businesses that support our outlook for growth in 2025.
• Although some uncertainty remains, we believe customer sentiment is generally more optimistic about the future of the economy and plans for increased investment in their businesses.
• Credit quality remained strong with low net charge-offs of 13 basis points, said Farmer.
• Persistent inflation and elevated rates continued to pressure customer profitability and drove expected normalization in both criticized and nonperforming loans.
• This modest migration was expected and already factored into our reserves, and as a result, our allowance for credit losses remained relatively flat at 1.44% of total loans.
• We continue to feel that our highly regarded approach to credit positions us well to support our customers and navigate future migration.

Industry Context

Comerica's results reflect a challenging environment for regional banks, with muted loan demand and pressure on net interest income due to higher rates and deposit pricing competition. The company's focus on deposit growth and expense management aligns with industry trends, as banks seek to improve profitability and efficiency in a dynamic market. The resumption of share repurchases signals confidence in Comerica's capital position and future prospects.

Comparison to Industry Standards

• Comerica's CET1 ratio of 11.89% is above the regulatory minimum and compares favorably to peers.
• The company's net charge-off ratio of 0.10% is low relative to historical averages and indicates strong credit quality compared to some other banks.
• Comerica's efficiency ratio of 70.68% reflects ongoing efforts to manage expenses, but is higher than some of the most efficient banks in the industry.
• The company's return on average assets (ROA) of 0.87% is below the 1% benchmark often used to assess bank profitability.
• Comerica's strategy of focusing on relationship banking and specialized verticals aligns with trends among regional banks seeking to differentiate themselves in a competitive market.

Stakeholder Impact

• Shareholders will benefit from the resumption of share repurchases and the company's strong capital position.
• Employees may see opportunities for growth and development as the company invests in strategic initiatives.
• Customers will benefit from Comerica's focus on relationship banking and its commitment to providing tailored solutions.
• The company's support for communities through capacity-building programs will have a positive impact on local economies.
• Creditors can be reassured by Comerica's strong credit quality and liquidity.

Next Steps

• Comerica will continue to focus on deposit growth and expense management.
• The company plans to execute approximately $50 million in share repurchases in the first quarter of 2025.
• Comerica will monitor credit quality and manage its loan portfolio.
• The company will continue to invest in technology and strategic initiatives.
• Comerica will host a conference call and live webcast to review fourth quarter 2024 financial results on January 22, 2025.

Key Dates