Comerica Earnings: Loan Demand Still Soft, and 2025 Outlook Also Disappointing

Key Morningstar Metrics for Comerica

• Fair Value Estimate: $59.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Comerica’s Earnings

Comerica CMA reported slightly disappointing results in the fourth quarter. Adjusted earnings per share of $1.20 declined by 12% from a quarter ago, mostly driven by a 4% sequential increase in expenses. The biggest disappointment comes from weak loan demand and management guidance of continuing loan growth softness in 2025. As we incorporate fourth-quarter results and the 2025 management outlook, we expect higher 2025 net interest income will be largely offset by higher 2025 expenses. We will maintain our fair value estimate of $59 per share and regard the shares as fairly valued after around a 5% stock price decline following the earnings.

Average loans declined by 0.5% from a quarter ago to $50.6 billion in the fourth quarter, mostly driven by the paydown of commercial real estate loans. Comerica expects its 2025 average loans to be flat to up 1%, which is disappointing compared with peers. Excluding the impact of CRE payoffs, the management team expects average loans to grow by 2%.

Commercial loan utilization continued to be soft, and the bank doesn’t expect it to pick up in 2025. Core NII grew 3% sequentially in the fourth quarter, excluding the non-core item of the cessation of the BSBY index. The bank expects 2025 NII to grow 6%-7% on a reported basis, or core NII up around 3% at midpoint. On a more positive note, the bank continued to pay down higher-cost brokered deposits in the fourth quarter. With tepid loan demand, Comerica can continue to reduce its high-cost funding sources in 2025.

The US Treasury has notified Comerica that the Direct Express program will have a three-year transition period. Comerica had around $3.5 billion of average non-interest-bearing deposits related to Direct Express in the fourth quarter. We think the transition period offers the bank an opportunity to grow its core deposit franchise, but it will also incur outside processing fee expenses. As such, we don’t expect a material change to our fair value estimate.