Comerica, amid pressure to sell, makes case for independence

• Key insight: Regional bank Comerica emphasized its priorities to investors Tuesday, saying it's committed to protecting shareholder value and enhancing profitability.
• What's at stake: The bank's message comes as it faces pressure to sell from an activist investor group.
• Forward look: HoldCo Asset Management, the activist investor, plans to move forward with a proxy battle in which it will nominate up to five directors to Comerica's board. 

The chief executive of Comerica , which is facing mounting pressure to sell itself, tried to hammer home a message to skeptics on Tuesday.

The Dallas-based bank is fully committed to protecting and growing shareholder value, and it has the right strategy in place to improve its long-lagging profitability, Chairman and CEO Curtis Farmer said at an industry conference.

"I and my management team and the board … we fully understand our fiduciary responsibility," he said. "We know it's all about execution, and myself and the board hold ourselves accountable to that high standard. We understand our responsibility to enhance shareholder value."

At the same time, Farmer did not slam the door on the possibility of selling the bank in the future.

"We are going to execute on the plan we've got, but also be aware of the landscape," he said.

Farmer's comments at the Barclays Global Financial Services Conference in New York City came one week after the Wall Street Journal reported that HoldCo Asset Management, an activist investor group that owns about 1.8% of Comerica's common shares, is planning to launch a proxy battle to install up to five new directors on Comerica's 11-person board.

In July, HoldCo published a critical 52-page report urging the $77.6 billion-asset Comerica to hire an investment banker and begin the process of marketing and selling itself to a larger bank.

The investment group accused Comerica of making poor financial choices and argued it has failed to address its lagging stock price performance. Comerica's stock price has risen about 2% over the past 25 years, while the KBW Nasdaq Bank Index, which tracks the performance of the 24 largest U.S. banks, has increased 57%.

In laying out its rationale for a sale, HoldCo identified potential buyers, including two — PNC Financial Services Group in Pittsburgh and Huntington Bancshares in Columbus, Ohio — that have recently announced acquisitions of smaller banks.

On Tuesday, HoldCo doubled down on its plans for a board fight. In a statement shared with American Banker, Vik Ghei, HoldCo's co-founder and co-chief investment officer, said: "We rarely run across people who question whether Comerica should be sold. The debate is almost always around whether Curtis Farmer will let it happen. And it's up to this 11-person board to put shareholders first. That's why we take our fight to the board."

In response, a Comerica spokesperson largely reiterated Farmer's comments, saying that the priority of the bank's management team and board "is to protect and grow shareholder value."

"We have a robust, differentiated franchise, operating in desirable, high-growth markets with a solid capital position, competitive funding profile and structural revenue tailwinds," the spokesperson said in an email to American Banker. "We believe our strategic positioning and strong balance sheet give us the engine and flexibility to meet the demands ahead of us."

During Comerica's second-quarter earnings call in July, Farmer faced tough questions from two analysts, Mike Mayo of Wells Fargo Securities and David George of Robert Baird. Both wanted to know how Comerica's management and board planned to improve the bank's performance.

Read more about Comerica here: https://www.americanbanker.com/organization/comerica-bank

Farmer seemed to be addressing those questions on Tuesday, saying that Comerica's strategy includes its "strong and differentiated" franchise, high-growth markets, a "competitive funding profile" and a "strong capital position" that supports organic growth and shareholder returns.

Farmer's comments show how companies in consolidating industries such as banking "need to walk a fine line and really balance out their message to investors," Terry McEvoy, an analyst at Stephens, told American Banker.

"They reiterated their business model and the initiatives that should drive improving performance going forward," McEvoy said. "While not specifically citing any individual investor group, there was an underlying tone that was, to some degree, in response to the lagging fundamental performance this year and the higher profile they have today among investors."