Executives at Comerica are now forecasting an even steeper decline in deposits for all of 2023, but the pace of outflows keeps slowing, and they hope that some deposits that fled might return.
Average deposits are now expected to decrease 14% to 15% compared with last year, executives said Friday during the Dallas-based company's second-quarter earnings call. That's steeper than the 12% to 14% decline predicted in April, and the 9% to 10% decline predicted in March.
Comerica CEO Curtis Farmer reiterated that while the company has seen an exodus of deposits — about
"We saw some customers diversify deposits," Farmer said. "And we hope over time — and seeing some signs, early signs of that — that customers will bring some of those deposits back."
The $90.4 billion-asset Comerica is one of several regional banks that experienced rapid deposit outflows this spring, especially among technology and life sciences customers who sought to diversify where they park their cash. Some other regionals, including
Deposits at the company, which peaked at $82 billion during the pandemic, have been shrinking for several quarters. The events this spring accelerated the outflow, but the company, which has a large base on non-interest-bearing deposits, had been anticipating some outflow due to rising interest rates and customers' desire to shift into interest-bearing accounts.
The company is now projecting year-end deposits to hover in the $63 billion to $64 billion range.
"I think the takeaway is that the industry has stabilized since March and there's not this panic going on," Christopher McGratty, an analyst at Keefe, Bruyette & Woods, said Friday in an interview. Comerica's "deposit issue isn't going away, but it's not getting worse at this juncture."
Average deposits at Comerica totaled $64.3 billion during the second quarter, down 17.1% year over year and down 5.2% compared with the first quarter of this year. The revision to the full-year guidance is a reflection of the Federal Reserve's ongoing quantitative-tightening program that began last year and the impact of the industrywide turmoil, executives said Friday.
Non-interest-bearing deposits made up around 47% of Comerica's total deposit base as of June 30, the company reported. That figure will probably "dip slightly" to around 44% to 45% by the end of this year, Chief Financial Officer James Herzog said during the call. The 47% includes period-end "elevated" customer balances that are expected to exit or have already moved out, he said.
Exactly how that percentage unfolds depends on several factors, including how successful Comerica is in bringing back interest-bearing deposits, Herzog said.
"And we would, of course, welcome back those interest-bearing deposits," he added.
CEO Curtis Farmer said the warehouse sector, where Comerica provides lines of credit to mortgage banking companies, has not been providing much help as the company seeks to bolster deposits.
Like some regional banks, Comerica is tweaking its balance sheet strategy. In June, it announced that it would
Combined, those decisions should keep loan growth "relatively flat" for the third quarter, he said.
As for the future of deposits in technology and life sciences, which started declining last year amid a slowdown in the tech sector, Comerica has no plans to step away from that business.
The cash burn that those companies are experiencing probably isn't over yet, but it will eventually be a case of cash-building at some point, said Peter Sefzik, Comerica's chief banking officer.
"We've been in that business a long, long time," Sefzik said. "We plan to stay in it."
