Comerica CEO believes loans will stabilize, increase compared to Q3

By Devika Patel

Knoxville, Tenn., Oct. 16 – Comerica Inc.’s top executive believes customers will be taking on more loans toward the end of the year and that average loans will become more stable relative to last quarter.

“Assuming continuation of the current economic environment, we expect loans to grow through the end of the year,” chairman and chief officer Ralph W. Babb Jr. said on the company’s third quarter ended June 30 earnings conference call on Tuesday.

“We believe this rebound will result in average loans being stable relative to third quarter,” Babb said.

Comerica sold some debt in July to pay off other debt that was maturing soon.

“We issued $850 million in senior debt at the end of July, primarily to fund our share repurchase program and prefund some debt that’s maturing in the first half of next year,” executive vice president and chief financial officer Muneera S. Carr said on the call.

The company expects to profit from rising interest rates.

“With increased loan commitments and seasonal factors, we expect loan growth to trend positive into the end of the year,” Babb stated in the company’s earnings release.

“We remain well positioned to meaningfully benefit from rising rates as we judiciously manage loan and deposit pricing,” he stated.

“We remain well positioned to benefit from future rate increases though this outlook does not include a December rate hike,” Babb said on the call.

“Our balance sheet is well-positioned to benefit from increases in rates,” Carr added on the call.

“Approximately 90% of our loans are floating-rate,” she said.

On July 31, Comerica sold $850 million of 3.7% five-year senior notes (A3/BBB+/A) at 99.991 to yield 3.702%, or a spread of Treasuries plus 85 basis points. The deal priced on July 26.

The notes priced on the tight end of guidance in the Treasuries plus 85 bps to 90 bps area. The bonds were initially talked to print in the mid to high 90 bps over Treasuries area.

Comerica dropped a planned floating-rate tranche of notes from the final sale.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RBC Capital Markets, LLC were the bookrunners.

Proceeds were earmarked for general corporate purposes.

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