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Comerica (CMA) Gives Q2 NII View, to Exit Warehouse Lending
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Shares of Comerica Incorporated (CMA - Free Report) rose 6.4% on Jun 13 trading hours after the company underlined expectations of second-quarter net interest income (NII) to be at the low end of the previously-mentioned range of a sequential decline of 11-13%.
Through May-end, average loans increased by $1.8 billion to $55.3 billion from first-quarter 2023-end, backed by commercial real estate and large corporate & national dealer services. However, average deposits declined to $64.4 billion from the first-quarter end’s $67.8 billion. Moreover, interest-bearing deposits constituted a higher composition of deposits. The unfavorable shift in the deposit mix will likely impede NII growth for CMA.
Comerica also announced plans to exit the mortgage banker finance business by 2023-end. The sale of the warehouse-lending business allows exit at full value compared to the sale of portfolio. As of the first-quarter end, it had $1.7 billion of mortgage banker finance loans. It will smoothen seasonality in its loan portfolio, enhance liquidity and improve the bank’s loan-to-deposit ratio by 150 basis points at 2023-end.
The company expects the loan-to-deposit ratio to be in the mid 80’s range by 2023-end. The Common Equity Tier 1 ratio for 2023 is expected to be more than 10%.
With the regional bank crisis, companies are making efforts to shore up liquidity and improve capital position amid the uncertain environment. CMA’s planned exit from the mortgage banker finance business will help the company to stabilize its liquidity. As of May 31, 2023, the company’s total liquidity capacity was $41 billion, with a staggered debt maturity profile offering it decent financial flexibility.
So far this year, shares of CMA have plunged 33% compared with the industry’s decline of 5.3%.
Image Source: Zacks Investment Research
As the Federal Reserve is expected to keep the interest rates high in the near term, asset-sensitive banks are expected to witness a decrease in NII as deposit costs rise. A tough operating backdrop, including waning loan demand, will aggravate the situation further.
In fact, at the same conference, KeyCorp (KEY - Free Report) presented weaker-than-expected NII guidance for second-quarter 2023.
KeyCorp’s CEO Chris Gorman noted that NII will come much lower than expected. Now, NII is anticipated to slide 12% sequentially in the current quarter, substantially below the 4-5% fall guided during the first-quarter earnings conference call.
Truist Financial (TFC - Free Report) management projected a modest decline in NII on higher deposit and funding costs. Also, at the Bernstein Strategic Decisions Conference in May-end, TFC’s CEO Bill Rogers commented that deposit costs are turning out to be a bit higher than previously expected.
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Comerica (CMA) Gives Q2 NII View, to Exit Warehouse Lending
Shares of Comerica Incorporated (CMA - Free Report) rose 6.4% on Jun 13 trading hours after the company underlined expectations of second-quarter net interest income (NII) to be at the low end of the previously-mentioned range of a sequential decline of 11-13%.
Through May-end, average loans increased by $1.8 billion to $55.3 billion from first-quarter 2023-end, backed by commercial real estate and large corporate & national dealer services. However, average deposits declined to $64.4 billion from the first-quarter end’s $67.8 billion. Moreover, interest-bearing deposits constituted a higher composition of deposits. The unfavorable shift in the deposit mix will likely impede NII growth for CMA.
Comerica also announced plans to exit the mortgage banker finance business by 2023-end. The sale of the warehouse-lending business allows exit at full value compared to the sale of portfolio. As of the first-quarter end, it had $1.7 billion of mortgage banker finance loans. It will smoothen seasonality in its loan portfolio, enhance liquidity and improve the bank’s loan-to-deposit ratio by 150 basis points at 2023-end.
The company expects the loan-to-deposit ratio to be in the mid 80’s range by 2023-end. The Common Equity Tier 1 ratio for 2023 is expected to be more than 10%.
With the regional bank crisis, companies are making efforts to shore up liquidity and improve capital position amid the uncertain environment. CMA’s planned exit from the mortgage banker finance business will help the company to stabilize its liquidity. As of May 31, 2023, the company’s total liquidity capacity was $41 billion, with a staggered debt maturity profile offering it decent financial flexibility.
So far this year, shares of CMA have plunged 33% compared with the industry’s decline of 5.3%.
Image Source: Zacks Investment Research
As the Federal Reserve is expected to keep the interest rates high in the near term, asset-sensitive banks are expected to witness a decrease in NII as deposit costs rise. A tough operating backdrop, including waning loan demand, will aggravate the situation further.
In fact, at the same conference, KeyCorp (KEY - Free Report) presented weaker-than-expected NII guidance for second-quarter 2023.
KeyCorp’s CEO Chris Gorman noted that NII will come much lower than expected. Now, NII is anticipated to slide 12% sequentially in the current quarter, substantially below the 4-5% fall guided during the first-quarter earnings conference call.
Truist Financial (TFC - Free Report) management projected a modest decline in NII on higher deposit and funding costs. Also, at the Bernstein Strategic Decisions Conference in May-end, TFC’s CEO Bill Rogers commented that deposit costs are turning out to be a bit higher than previously expected.