Last summer bank analysts gave Comerica Inc. little chance of remaining independent.
Last July, financial commentator Dan Dorfman said on his CNBC television show that the $35 billion-asset bank would be acquired within three months. And in December, the Detroit company's stock price jumped nearly 10% over a two-day period on takeover speculation.
But Comerica has managed to keep it's independence, through a concerted campaign of cutting costs, buying back shares, and selling off unprofitable businesses.
The plan has provided a blueprint for other regional banks looking to avoid the inevitable takeover route.
Some analysts are now singing the company's praises. First-quarter earnings of $117 million were up 17% from the same quarter a year ago. Since last summer, Comerica's share has climbed from the high 20s to a recent high of 44.62.
"Comerica officials looked at the organization and said, 'What would another bank do if it took us over?'" said Fred Cummings, an analyst with McDonald & Company Securities. Then, Comerica did those things itself.
During a recent interview, Comerica chairman Eugene Miller said keeping his bank independent meant making a undivided effort to trim costs, even if it meant selling off assets that other bankers might be reluctant to part with.
"I don't worship at the altar of size, but rather profitability," Mr. Miller said.
On May 23, Comerica completed the sale of its $51 million-asset customs brokerage business, John V. Carr & Son Inc.
In the third quarter, Comerica said, it plans to sell its $1.4 billion- asset Illinois bank to ABN Amro North America for $190 million in cash.
Mr. Cummings praised both moves. The money earned from the sales will go toward Comerica's stock buyback program. The bank plans to purchase 15 million shares, or about 12.7% of its outstanding common stock, a substantial increase from the 300,000 shares purchased last year.
"These moves position them for growth in '97 and beyond," Mr. Cummings said. "This company is firmly in control of its own destiny."
Lehman Brothers analyst Michael Mayo said Comerica has done two of the three steps needed to remain an independent bank. It's sold off unprofitable businesses and it's managing its capital by buying back stock. Now, Comerica needs strong revenue growth, and the growth needs to come from existing business, rather than through acquisitions, he said.
In March of last year, Comerica began a streamlining and cost-cutting program. Company officials said 200 to 300 of its 13,000 positions will be eliminated in the next year.
Comerica said much of its revenue will come from expanding its commercial lending, but the bank also believes there are opportunities to increase retail banking market share in Michigan.
Mr. Mayo said he isn't convinced being a better retail bank is the key to Comerica's revenue growth. He said he believes the focus should continue to be lending to midsize businesses.
"I think almost any bank their size is reviewing the businesses they're in and slicing and dicing their business mix," Mr. Mayo said.
Still, Mr. Miller said he feels good these days. He said he has stopped listening to critics years ago.
And, he pointed out that skeptics said Comerica wouldn't be able to operate banks in California and Texas. Today, 18% of the company's assets are in those states.
