Comerica Reports 14% Sequential EPS Growth in Q2

Comerica (NYSE:CMA) reported its Q2 2025 earnings on July 18, reporting EPS of $1.42 (up nearly 14% sequentially). In the quarter, it returned $193 million to shareholders through stock repurchases and dividends. Management highlighted inflecting loan growth, normalization of pressured deposits, disciplined expense control, and sustained capital strength, while maintaining guidance of net interest income growth of 5% to 7% for the year, despite anticipated short-term headwinds.

Loan Growth Highlights Organic Business Momentum

The company achieved period-end loan growth of approximately 3%, and increased total commitments by $400 million, with particularly strong activity in environmental services and commercial real estate, even as average loans in equity fund services declined. Management said middle market loan pipelines are improving, and activity feels better than it has since the Silicon Valley Bank situation, though levels have not yet returned to their norms before that institution's March 2023 failure, despite sectorwide uncertainty and a period of portfolio rationalization following the 2023 regional bank crisis.

"We saw an inflection in loans as balances grew consistently throughout the quarter across most of our businesses. Our deposits came down modestly, favorable loan fee income and excess trends drove a sizable increase in both net income and PPNR. Capitalization remained a strength with an estimated CET1 of 11.94%, well above our 10% strategic target, even after a compelling dividend and higher share repurchases. Sentiment improved as we saw signs of customers beginning to make measured investments in their businesses."
— Curt Farmer, President, Chairman and CEO

Renewed loan growth signals a possible shift in business customer confidence and lays groundwork for sustainable revenue expansion after several quarters of muted activity and balance sheet optimization.

Deposit Franchise and Strategic Technology Investment Underscore Competitive Strength

Non-interest-bearing deposits remained stable at 38% of total deposits for the fourth consecutive quarter, demonstrating resilience in a sector that has seen significant deposit migration and pricing competition. The launch of two new real-time payment solutions marked further progress in digitizing Comerica's offerings, intending to solidify customer relationships and enhance funding mix quality.

"Just this quarter, we delivered two new real-time payment solutions providing additional flexibility for our customers. We feel these success stories are strong proof points of the effectiveness of our strategy."
— Jim Herzog, Chief Financial Officer

Maintaining a robust proportion of low-cost deposits and proactively investing in real-time payments infrastructure positions the company to better manage funding costs, support loan growth, and safeguard margins relative to less technologically agile peers.

Expense Discipline and Capital Management Enable Shareholder Returns Amid Challenging Efficiency Metrics

Non-interest expense decreased by $23 million quarter-over-quarter, aided by lower litigation and compensation costs, as well as certain non-recurring benefits, resulting in an improved efficiency ratio even as management acknowledged continued sector-leading expense levels. Its estimated Common Equity Tier 1 (CET1) ratio stands at 11.94%, materially above the internal 10% CET1 target. That condition allowed management to increase share repurchases in Q2 to $100 million. Ongoing scrutiny from shareholders and analysts remains focused on the company's below-peer long-term efficiency and return metrics.

"Our strong capital position afforded us the opportunity to redeem preferred stock, avoiding a more punitive coupon reset, but also resulting in a slight negative drag to EPS this quarter from costs related to the preferred stock redemption."
— Curt Farmer, President, Chairman, and CEO

Capital strength and opportunistic share repurchases underpin excess return potential, but persistent efficiency challenges elevate pressure on management to translate growth investments and digital enhancements into sustainable, peer-competitive profitability metrics.

Looking Ahead

Management forecasts that its average loans will be flat to down 1% in 2025 -- a narrowing of the previous guidance range -- while anticipating average deposits will decline by 2% to 3% as its strategic reduction in brokered CDs continues. Net interest income is projected to grow by 5% to 7% for the year, with net interest income expected to dip in the third quarter before resuming sequential growth in the fourth. Non-interest expenses are now expected to grow by 2% in 2025, an improvement from earlier guidance. The CET1 ratio is expected to remain near 12% in Q3, which will support at least $100 million in stock repurchases in the quarter. Management does not assume Direct Express deposit attrition in its 2025 outlook. No explicit long-term (2026+) quantitative guidance was disclosed in the transcript.

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