that is reshaping the banking industry. Referring to the pending merger between Detroit rival NBD Bancorp and First Chicago Corp., Comerica president Michael T. Monahan said, "You could say we may have eliminated a competitor." But isn't the remaining competitor going to be that much bigger and tougher? True enough, say Comerica executives. But the strategy the $35 billion-asset banking company is pursuing involves relying on - and building upon - its historical strength in corporate banking. This is not a story about a corporate turnaround, or a major bank reengineering, or even a rejiggering of business focus. Comerica has long been a premier business lender, and has posted steady and solid numbers for years. The bank trumpets its credit culture, and has the numbers to back it up. Noted Joe Duwan, an analyst with Keefe, Bruyette & Woods Inc. in New York. "In 1989 to 1992, their (nonperforming asset) ratio peaked at 1.5%, which is amazing." Comerica is the nation's 26th-largest bank holding company, but ranks 11th in business lending. And since its merger with Detroit rival Manufacturers National Corp. in 1992, the bank has claimed its place as the dominant lender to large and midsize businesses in southeastern Michigan. And while Comerica has been devoting greater attention to building its consumer banking operation, Mr. Monahan said those efforts would over time only "slightly" reduce the relative weight of corporate banking in its overall business mix. Among U.S. bank holding companies today, only Bank of Boston Corp. has a higher percentage of its assets in commercial loans. (Comerica ranks just below NBD in business loans. But such lending represents 30% of Comerica's total assets compared to NBD's 23%.) "We clearly believe that we have both the size and the skills to compete effectively, particularly in the commercial markets we are in," said Mr. Monahan. And while Comerica's consumer bank can compete in its existing markets, Mr. Monahan said: "Given our present configuration, we're not going to be making huge inroads in consumer business outside the markets we already are in." He said that the need to have enough scale to invest heavily in technology - a factor cited in several of the big merger deals this year - is not a barrier for Comerica. "Large parts of these technologies issues that they were referring to are primarily attributable to the retail and mass market, and not the commercial, side," he said. But Comerica, like all banks, does face challenges amidst the growing competition from bank and nonbanks alike. The Detroit bank's continuing response is to focus on building relationships with its customers. "You cannot live off the margin," said Joseph J. Buttigieg 3d, the executive vice president responsible for corporate and international banking. "You have to be a major provider services to a corporate entity to really develop the profitability that you want." That focus goes a long way toward explaining what's been happening at Comerica lately. It has reorganized the treasury management, or cash management, department; set up a loan syndication group; kept investing in new technology; and acquired W.Y. Campbell & Co., an investment banking firm. "We've grown nicely in the last three or four years since the merger" with Manufacturers, said Mr. Buttigieg. "(But) I think we can do more in terms of cross-selling noncredit services to that customer base." Comerica said the bank encourages cross-selling by having managers in different businesses - trust, cash management, international, for example - work as a team. "We have a person in international who is totally devoted to serving the corporate banking division," noted Ronald P. Marcinelli, senior vice president and head of corporate banking for Comerica Bank. Mr. Marcinelli added that the structure must also be aided by rewarding employees for cross-selling. As much as 30% of employees' compensation is incentive-based. Comerica executives see great opportunity for its treasury management division. Earlier this year, the bank reorganized the function, bringing product development, product management, operations, sales, and service under a single manager who reports to Mr. Buttigieg. Among the areas the bank is now emphasizing is electronic data interchange. Ten years ago, Comerica began to work with eight others banks to develop an EDI project to facilitate payments to suppliers of the big automakers. More recently, it has introduced a Windows-based "gateway" product to better handle electronic transmissions between the bank and business customers. "What this allows the corporate customer base to do is to take directly from their internal systems - and transmit directly to our systems - information involving the initiation and actual payment of funds to a bank group," said Mr. Buttigieg. So far, the system is being used only to automatically initiate letter- of-credit transactions. But Mr. Buttigieg said Comerica Gateway will be made available to a cross-section of industries. "We are very dedicated to expanding our capabilities in the electronic communication arena," he said. And Comerica, which was an early user of imaging technology for check processing, is planning to obtain similar systems for its retail lockbox operation. In addition to offering a broader range of treasury management products, the bank has also sought to expand services to its middle-market and large corporate customers who have expanded abroad. The bulk of Comerica's international banking activities involve trade finance. Executives like to point out that Michigan and the other states where Comerica has affiliates - Illinois, California, and Texas - together account for the majority of U.S. international trade. The bank has $1.9 billion of international loans outstanding, about $800 million of which is in Mexico. "Our clients in Mexico are local companies, joint ventures, foreign- owned subsidiaries - people that are very much involved in that market, but also very significant exporters," said Douglas A. Ransdell, senior vice president, global banking division. Executives said that the collapse of the Mexican peso last December posed little risk to the bank. "The techniques of tying up the trade flows and making sure you capture cash flows (are) ways that you can substantially if not fully mitigate your transfer risk," said Mr. Ransdell. Comerica's efforts to limit risk in its international activities are not isolated. Executives talk about the strength of the bank's credit quality. "Credit quality, even through the recession, was excellent," said Mr. Buttigieg. "We've had excellent credit quality through all cycles of the economy." Bankers credit low turnover and a rigorous training program for corporate lenders. Mr. Marcinelli compared the 18-month process to pledging a fraternity. Mr. Duwan, the Keefe Bruyette analyst, said, "They have a very good credit culture, which is important to emphasize, particularly at this stage of the (business) cycle." Another strategy is to export that culture to new markets. Key positions at acquired institutions are filled by managers steeped in Comerica's ways. "They serve almost as a yeast to forge the growth in the franchises in the states other than Michigan," said Mr. Monahan. That approach is supported by technology. Personal computers used for letter-of-credit collections, for example, are linked to the parent company's back office. "We have really tried to export this relationship banking concept and to deliver our products on common platforms and common ways throughout the organization," said Mr. Buttigieg. "I think that gives us a big advantage." And a culture that emphasizes both selling and credit has been a winning formula, executives say. In recent years, both large corporate and international lending have grown at about 10% annually, a rate expected to continue. Comerica's corporate business grew up around the middle-market and large corporations in Michigan, including the big automakers and their suppliers. More recently, hospitals and other health care companies have become major bank customers. The merger with Manufacturers National, which executives say had been a bigger player in lending to large corporations, also complemented Comerica's strength, which had been in middle-market lending. The middle-market customers are divided into two groups, a legacy of the premerger banks. The upper middle-market area serves companies with sales above $25 million; the other serves firms with sales of between $5 million and $25 million. Mr. Ransdell said the structure was chosen to avoid disrupting customer relationships with officers from the respective banks. The combination of the two banks also led last year to the creation of a loan syndications group. "We want to work with the loan groups to enhance the customer relationship by providing value-added expertise and resources, particularly as it relates to underwriting and agency mandate opportunities," said Michael L. Fidler, first vice president. It also helps Comerica "establish a network of banks that underwrite credit much in the same way that we do, and manage that in a way to generate greater reciprocity." Comerica executives are confident that the array of products and services they have assembled will make them tough competitors. "The additional threat implied by the very large mergers that are taking place is minimal," said Mr. Monahan.

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