Comerica explains rationale for investments in tech, new geographies

Comerica is counting on planned expansions in the Southeast and the Mountain West to help build on its streak of loan growth in the face of rising interest rates.

The Dallas-based institution said Tuesday that it recorded $965 million growth in average loan originations during the first two months of the fourth quarter, up 1.9% from the third quarter.

Earlier this week, Comerica announced that it has advanced its plans for expansion in the Southeast by adding dedicated offices in South Carolina and Georgia. And on Tuesday, it noted plans for similar investments in Arizona and Colorado. The $84.2 billion-asset company already has a large presence in Texas, California, Florida, Arizona and Michigan.

Troy Harvey/Bloomberg

"Striking a balance between local presence and national coverage, we feel we have an efficient and effective model," said Curt Farmer, chairman, president and chief executive of Comerica.

In addition to geographic expansion, Comerica is putting a big emphasis on overhauling its digital systems.

Chief Financial Officer Jim Herzog said during Goldman Sachs' investor conference held earlier this week that the COVID-19 pandemic underscored the importance of digital offerings for both consumers and commercial organizations.

"For us to continue investing in the business, in technology, in the right talent on the ground to grow revenue and investing in product capabilities all remain really high priorities for us," he said.

He indicated that the investments in both technology and new geographies are meant to yield benefits over the next two to five years. The additional spending is being offset to some degree by cost savings from staff reductions.

Comerica has shrunk its employee base by more than 1,600 people since 2012, and it announced earlier this year that it would shutter 22 branches, which was nearly 5% of its overall retail presence. Over the last decade, the organization has downsized its real estate footprint by roughly 1.3 million square feet, according to third- quarter data. 

During their remarks Tuesday, Comerica executives also spoke about pressure on deposits as interest rates continue to rise.

Commercial banking

Comerica is expanding into South Carolina, Georgia

December 5, 2022 5:48 PM

Comerica's previous forecasts for trends in average deposits have held true, as the company reported a 2.3% drop from the third quarter to $71.3 billion in the first two months of the fourth quarter.

To counteract the loss of deposits, the company is emphasizing maintaining relationships with existing customers, as well as balancing its liquidity position and funding costs, Farmer said. Those moves resulted in interest-bearing deposit costs of 20 basis points during the third quarter. That was an increase from 6 basis points in 2021, but still lower than the costs reported by many competitors, according to Farmer.

"This strategy resulted in the lowest cost in interest-bearing deposits, relative to our peers, in the third quarter," he said.