Comerica Inc
NYSE:CMA
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
43.28
71.09
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Comerica Inc
Earnings Call Analysis
Q2-2024 Analysis
Comerica Inc
In the second quarter of 2024, Comerica reported earnings of $206 million, translating to $1.49 per share. This performance marks an improvement from the first quarter on both a reported and adjusted basis. Despite fluctuations due to an uncertain economic and political environment, the company’s strategic focus on responsible growth has positively influenced average loan balances, supporting a favorable growth outlook.
Second-quarter financial highlights reveal a period of consistent growth in loan balances, driven by Comerica’s National Dealer Services and other business lines. However, average deposit balances decreased by $2.3 billion, primarily due to lower broker time deposits. The company’s net interest income decreased by $15 million to $533 million, largely due to lower Federal Reserve deposits and loan balances, which were partially offset by a decline in wholesale funding. Nonetheless, Comerica’s credit quality remained strong, with net charge-offs at 9 basis points, below their historical averages.
On the operational front, expense management has been a priority for Comerica. The company saw a decline in noninterest expenses by $48 million, with salaries and benefits reducing by $25 million due to lower seasonally based stock compensation. The company's efforts in real estate rationalization and consulting, paired with a focus on efficiency and operational losses management, also contributed to this improvement.
Comerica’s noninterest income for the second quarter rose by $55 million, reaching $291 million. This increase was attributed, in part, to the cessation of BSBY in the first quarter. The company also witnessed growth in capital markets income, fiduciary income, and brokerage income. Strategic investments, including those in Comerica Financial Advisors and a new platform, played a role in driving this revenue growth. The company continues to prioritize these key investments to enhance fee income over time.
Comerica's capital ratios saw improvements, with the estimated CET1 ratio growing to 11.55%, well above the strategic target of 10%. This growth was driven by higher profitability and conservative capital management practices. Despite the volatility, the quarter-end volatility in AOCI remained relatively flat, and the company continues to monitor it as part of its ongoing capital management strategy.
Looking ahead, Comerica provides guidance for a modest decline of 2-3% in net interest income in the third quarter, primarily due to deposit and loan pressures and the impact of BSBY cessation. However, excluding BSBY, the net interest income is projected to decline by just 1%, marking a cyclical low point. Credit quality is expected to remain strong with full-year net charge-offs predicted to stay within a lower range of 20-40 basis points. The company also forecasts noninterest income to grow approximately 1-2% on a reported basis for the full year, despite a projected decline in the third quarter noninterest income.
A significant strategic shift involves Comerica’s impending exit from managing the Direct Express prepaid debit card program. While this will result in the transition of noninterest-bearing deposits averaging $3.3 billion, the company views this as an opportunity to redirect resources towards core relationship-based deposit strategies. Initiatives targeting deposit growth, especially in the small business sector and enhanced treasury management and payment services, are expected to yield stable funding and consistent growth.
In conclusion, Comerica remains focused on strengthening its balance sheet and leveraging its commercial lending strengths while navigating the current economic landscape. The company’s strategic initiatives and growth outlook position it well for future expansion, despite some near-term cyclical pressures. This proactive stance and continuous investments in strategic areas are expected to foster sustainable growth and shareholder value in the long run.
You don't have any saved screeners yet
Hello, and welcome to the Comerica Second Quarter 2024 Earnings Conference Call. [Operator Instructions]
As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kelly Gage, Director of Investor Relations. Please go ahead, Kelly.
Thanks, Kevin. Good morning, and welcome to Comerica's Second Quarter 2024 Earnings Conference Call. Participating on this call will be our President, Chairman and CEO, Curt Farmer; Chief Financial Officer, Jim Herzog; Chief Credit Officer, Melinda Chausse; and Chief Banking Officer, Peter Sefzik.
During this presentation, we will be referring to slides, which provide additional details. The presentation slides and our press release are available on the SEC's website as well as on the Investor Relations section of our website, comerica.com. The presentation on this conference call contain forward-looking statements. In that regard, you should be mindful of the risks and uncertainties that can cause actual results to vary materially from expectations. Forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward-looking statements. Please refer to the safe harbor statement in today's earnings presentation on Slide 2.
Also, the presentation in this conference call will reference non-GAAP measures. In that regard, I direct you to the reconciliation of these measures in the earnings materials that are available on our website, comerica.com.
Now I'll turn the call over to Curt, who will begin on Slide 3.
Good morning, everyone, and thank you for joining our call. Today, we reported second quarter earnings of $206 million or $1.49 per share, outperforming the first quarter on both a reported and an adjusted basis. Although average loans declined, our targeted focus on responsible growth drove an inflection in balances throughout the quarter. In an uncertain economic and political environment, customer sentiment appeared slightly less optimistic than last quarter. However, a number of our businesses saw positive momentum and we believe our pipeline supports our growth outlook. As expected, net interest margin started to rebound in both noninterest income and noninterest expenses improved. Credit quality remained strong, reflecting our proven underwriting discipline.
Being a responsible company is deeply embedded in our culture. And in June, we published our 16th Annual Corporate Responsibility Report, detailing our commitments to this important topic. We remain proud of our efforts to prioritize our employees and communities. Once again, U.S. News recognized us as one of the best companies to work for, and we were named one of the 50 most community-minded organizations. We feel responsible business is a good business, and we take pride in the unique role we play in supporting our markets.
Second quarter financial highlights are on Slide 4. Average loans were impacted by muted first quarter demand, but balances increased consistently throughout the quarter. Our deliberate first quarter reduction in broker time deposits drove the majority of the decline in average deposits. However, we also continue to see pressure on noninterest-bearing balances as we near what we believe may be the peak of the rate cycle. The decline in net interest income reflected both lower Fed deposits and average loans.
Charge-offs remain below historical averages at 9 basis points, and our loan loss reserve declined modestly. Even excluding the net benefit from lower notable items, both noninterest income and noninterest expenses saw favorable trends. Taxes increased due to higher income and less of a benefit from discrete items, and our estimated CET1 of 11.55% remained above our 10% strategic target. While we remain in an elevated rate environment, we think that favorable customer-related trends coupled with the expected structural benefit to net interest income in coming quarters positions us well.
Now I'll turn the call over to Jim to review our second quarter financial results in more detail. Jim?
Thanks, Curt, and good morning, everyone. Turning to Slide 5. Trailing effects of rationalization efforts coupled with soft demand at the start of the year, impacted average loan balances in the second quarter. Low utilization trends persisted in equity fund services, although balances rebounded in June and elevated rates continued to impact wealth management loans. Commercial real estate utilization trended higher. However, period-end balances remained flat to the first quarter. We have been purposefully managing commitments and originations in this space for several quarters, and we expect to begin to see growth subside in this business.
Total loan balances grew consistently throughout the quarter with period-end loans up over $1 billion. National Dealer Services contributed to quarter end growth with elevated balances due in part to the cyber-attack that impacted dealerships nationwide in June, but we also saw increases across most business lines. Our pipeline remains strong and supports our expectation for continued growth.
Moving to Slide 6. Average deposit balances declined $2.3 billion, but almost 70% of the decrease was attributed to lower broker time deposits. Pressure on noninterest-bearing balances increased relative to trends we observed in the latter half of the first quarter as customers utilize funds to support ongoing business activity or reduce borrowings. Tax-related seasonality impacted select businesses such as municipalities. While we saw some deposit remixing at the customer level, it did not appear to be the biggest driver. Even with noninterest-bearing balance trends and ongoing success in winning new interest-bearing deposit relationships, we believe our noninterest-bearing mix remained peer leading, averaging 40% for the quarter.
Interest-bearing deposit costs improved 5 basis points, driven by lower broker time deposits, and increases in customer deposit pricing continued to flatten. As rates decline, we expect to see an inflection point in deposit balances, mix and costs. In the meantime, we remain encouraged by our success in growing interest-bearing deposits and continued pricing discipline.
Period-end balances in our securities portfolio on Slide 7 declined with continued paydowns and maturities as the mark-to-market adjustment remained relatively flat. We expect continued decline in balances through at least the end of the year.
Turning to Slide 8. Net interest income decreased $15 million to $533 million, driven by lower Fed deposits and loan balances, partially offset by a decline in wholesale funding. Impacts from the BSBY cessation drove $6 million of the decline as we recognized a $3 million noncash loss in the second quarter compared to a $3 million increase in the first quarter. As a reminder, you can find the expected future BSBY impacts in the appendix to the slides.
Normalization of our cash position drove an increase in net interest margin for the quarter. As shown on Slide 9, successful execution of our interest rate strategy and the composition of our balance sheet positions us favorably for a gradual 100 basis points or 50 basis points on average decline in interest rates. By strategically managing our swap and securities portfolios, while considering balance sheet dynamics, we intend to maintain our insulated position over time.
Credit quality remained strong as highlighted on Slide 10. Net charge-offs of 9 bps declined for the second consecutive quarter and remained well below our normal range. Although customers continue to navigate high borrowing costs and inflation, we saw an improvement in criticized loans concentrated in our core middle market businesses. Nonaccrual loans ticked up slightly but still remain below historical averages. We did not observe any new emerging pressures, and metrics within our incrementally monitored portfolios remain relatively consistent. With the reduction in the allowance for credit losses to 1.38% of total loans, we continue to believe ongoing migration will remain manageable.
On Slide 11, second quarter noninterest income of $291 million increased $55 million. Although a majority of the increase was related to the impact of BSBY cessation in the first quarter, we were encouraged to see growth across most customer-related categories. Capital markets income grew in each product, including M&A advisory services as a result of the new team we put in place last year. Fiduciary income saw seasonal tax-related increases and brokerage income benefited from investments in our new platform for Comerica Financial Advisors. We were pleased to see successful revenue growth associated with our strategic focus on noninterest income and continue to prioritize these key investments.
Expenses on Slide 12 improved $48 million over the prior quarter. Salaries and benefits declined $25 million with seasonally lower stock-based compensation as the biggest driver. FDIC expense came down due to the large special assessment in the first quarter. Other expenses declined, including consulting, operational losses and asset impairment costs associated with real estate rationalization, partially offset by seasonally higher advertising. Overall, expense management remains a high priority as we continue to seek opportunities to drive positive operating leverage and efficiency.
As shown on Slide 13, higher profitability coupled with conservative capital management drove increases across all of our key capital ratios. Our estimated CET1 grew to 11.55%, and adjusting for the AOCI opt-out, our estimated CET1 remained above required regulatory minimums and buffers. Despite volatility throughout the quarter, at quarter end, AOCI remained relatively flat. As we think about ongoing capital management, we need to continue to monitor AOCI movement, our loan outlook and regulations as they evolve.
Before moving to the outlook, as indicated on Slide 14, we recently received preliminary notification from the fiscal service that Comerica Bank was not selected to continue serving as the financial agent for the Direct Express prepaid debit card program following the expiration of our contract early next year. This process remains fluid as contract negotiations are not yet final, but at this time, we do not expect that Comerica Bank will retain the business long-term. As detailed on the slide, we recognized noninterest income and card fees, but that is generally offset by expenses associated with managing the program.
The financial value has been in the noninterest-bearing deposit balances related to monthly benefits funded on the cards, which have grown over time and averaged $3.3 billion in the second quarter. As we have discussed in the past, there are various potential scenarios with regards to the timing and mechanics of the deposit transition, and we expect more detail in the coming quarters as terms become final. However, our experience with this program leads us to believe this transition may be longer than shorter, and we do not currently anticipate an impact to 2024 deposit balances, noninterest income or expenses.
While we have been honored to manage this important program, we see this as an opportunity to refocus and reprioritize resources towards targeted deposit strategies more in line with our core relationship operating model. Several of these key initiatives are listed on Slide 15 in leverage proven expertise, coupled with strategic investments with the goal of driving core deposit growth and consistent funding over time. As an example, we have been leaning into our competitive position as the leading bank for business to expand our focus within small business. Expected growth in this space should enhance the granularity and consistency of our deposit profile and we were encouraged to see our investments drive favorable customer trends for the quarter. Select talent acquisition and business optimization activities and treasury management and payments have been designed to further capitalize on our strong core product set and should allow us to deliver more comprehensive liquidity solutions to our customers.
Through our experience with Direct Express, we have developed competitive card capabilities that we are already leveraging to win new relationships. Online enhancements within retail are intended to further improve the user experience while expanding our customer reach.
Finally, we see opportunities to leverage our existing delivery model, strong product set and industry knowledge to further target deposit-rich customers, which should help drive stable funding opportunities. In short, we are very excited about the deposit initiatives we are executing on, and look forward to continuing to prioritize deposit growth as a key strategic focus.
Our outlook for 2024 is on Slide 16. We project full year average loans to decline 4% or grow 2% point-to-point from year-end 2023 to 2024. Trailing effects from our strategic optimization efforts and muted demand across the industry dampened our outlook slightly. However, our strong pipeline and momentum still supports broad-based growth expectations in the second half of the year.
Full year average deposits are projected to be down 3% from 2023 or down 2% point-to-point. We expect average broker time deposits to be relatively consistent from full year 2023 to full year 2024. Although we anticipate some level of continued cyclical pressure on noninterest-bearing balances and ongoing success in winning new interest-bearing deposits, we expect to maintain a favorable deposit mix in the upper 30s. The combination of noninterest-bearing deposit trends and lower average loans impacts our net interest income outlook as we now project a 14% decline year-over-year.
On a quarterly basis, we expect those same deposit and loan pressures and the negative impact from BSBY cessation to drive a 2% to 3% decline in net interest income. Adjusting for BSBY, third quarter net interest income is only expected to decline a modest 1% as we believe we are at the cyclical low point. We also believe deposit costs will continue to increase slightly until rates begin to decline. Credit quality remains strong and successful recoveries helped drive lower net charge-offs this quarter. With persistent elevated rates and inflationary pressures, we believe modest migration is possible. However, we expect it to remain manageable.
Given our strong results to date, we forecast full year net charge-offs to approach but remain below at the lower end of our normal 20 to 40 basis point range. We expect noninterest income to grow approximately 1% to 2% on a reported basis, which would be down 1% year-to-year when adjusting for BSBY and the impact of the Ameriprise transition as detailed in the appendix. Third quarter noninterest income is expected to decline 3% to 4%, driven largely by lower projected noncustomer income. Within the second quarter, we recognized a $6 million gain due to our derivative related to the Visa Class B exchange program and benefited from smaller valuation adjustments accounted for another income. We project lower FHLB dividends consistent with lower wholesale funding and we expect risk management income to decline based on the forward curve and our hedge position. Despite these 9 customer trends, we remain very encouraged about our customer-related momentum and investments to grow fee income over time.
Full year noninterest expenses are expected to decline 2% to 3% on a reported basis, to grow 4% after adjusting for special FDIC assessments, expense recalibration, modernization and the accounting impact from the Ameriprise transition. Third quarter noninterest expenses are expected to increase 3% to 4% over the relatively lower second quarter levels as we intend to reinvest savings from our expense calibration efforts and the headcount in line with our risk management and strategic priorities. We also expect to see elevated occupancy expense associated with transitioning our corporate facilities and seasonally higher taxes, maintenance and repair. With an ongoing focus on expense discipline, we continue to seek opportunities to offset our self-fund emerging pressures.
Even with the strong projected loan growth in the second half of the year, we expect our CET1 ratio to remain well above our 10% strategic target through year-end. We will continue to monitor AOCI and the regulatory environment as we take a conservative approach to share repurchases in 2024. Despite some near-term cyclical pressures, we expect continued momentum in the second half of the year to position us well for 2025.
Now I'll turn the call back to Curt.
Thank you, Jim. We are proud of our second quarter results and find the more recent loan and fee income growth trends, coupled with our overall earnings trajectory, to be compelling. As highlighted on Slide 17, we feel we have a unique value proposition, and it starts with our strong foundation of credit, capital and liquidity. From that foundation, we execute on a diversified strategy across select markets and businesses designed to mitigate risk and deliver enhanced returns over time. Tying our strong foundation together with our differentiated strategy, we feel we are well positioned for future growth. We expect meaningful structural tailwinds to net interest income due to anticipated maturities and repayments within our swap and securities portfolio. Our strategic investments are designed to drive consistent capital-efficient income and we saw encouraging results from those investments this quarter.
Finally, we believe our balance sheet is well positioned for responsible, profitable growth as we leverage our demonstrated strength as a commercial lender and prioritize our targeted deposit initiatives. While the market remains focused on the timing and magnitude of rate cuts, we feel we have positioned our balance sheet to drive long-term value regardless of the rate environment.
We appreciate your time this morning, and we'll be happy to take your questions.
[Operator Instructions] Our first question today is coming from Ken Usdin from Jefferies.
Look, I'd like to follow up on the Direct Express and just ask you, you mentioned that it could be delayed to some point. So I'm just wondering if you can walk us through the steps from here? When do you think you'll know when that start point is? And then I think the most important is, the $3.3 billion of average deposits, what would be the natural trajectory of time for those to kind of go to 0, in the scenario, you actually keep them all even under the transition at start point?
Yes. Ken, it's Peter. So at this point, all of this indication from the fiscal service is preliminary. What the next few months looks like will sort of be, to be determined. We hope over the next couple of quarters to get a little more clarity on what the transition does look like. I would tell you, our focus is on working really closely with the physical service to make sure that this is a very smooth transition for the customer base here that's really important to us, and I know it's important to them as well. And so we want to be sure that we're able to execute on that for them.
And as far as the timeline of what the deposits look like and when they leave, as we have said for quite a while now, we believe that to be a longer time period rather than a shorter time period. It's about as much clarity as I can give to you on it because we just don't really know. I would tell you that our experience, having managed this program for a very long time now is that this is a significant transition. There's 4.5 million cardholders. And that this would take a long period of time. So that's going to be something that we will learn hopefully in the coming quarters. And as we get more clarity on it, our intention would be to provide that clarity to you as well.
And I would tell you also that we continue to be very focused on running our playbook for our relationship model, as Curt and Jim has said in our comments. We feel like we've got a whole lot of ways to manage this on a go-forward basis for the company and feel like we'll be able to redirect these resources to be more focused on what we really do as a leading bank for business.
Okay. Got it. And then just bigger picture question. In the scenario where you don't keep it and even if there's a long tail, it still could be a decent hit to earnings power. But how much does this change just overall, if at all, strategic thinking about where the company is going in terms of adjusting to a different potential earnings power level?
Ken, it's Jim. I would start out by saying that it is absolutely our intention to replace these deposits over time. As I look at it, short-term, of course, there will be no effect. We do think it will be somewhat of an elongated transition. Long-term, we do expect to replace these deposits, and we expect to replace them with core customer deposits that, as Peter and Curt said, probably better fit our business model. Medium term, we'll wait and see how the transition goes. But over time, it is our expectation to replace these with core deposits and minimize the impact, potentially no impact over the long-term.
Having said that, to the extent there is a bit of a transition in the medium term, we do start with a great balance sheet, low levels of wholesale funding, loan-to-deposit ratio. We don't think it affects us strategically. And I would just emphasize that it is our intention over time to replace these deposits to remove any impact to long-term profitability.
Next question today is coming from Chris McGratty from KBW.
Just following up on the question, thinking about how the balance sheet, you may react with your balance sheet. You've got a bond portfolio that throws off a lot of cash. Is one -- I'm trying to get a better handle on. Is the scenario, replace the deposits with interest-bearing over time, which is a hit, or selling perhaps low-yielding bonds, which would perhaps be less of an impact? Any color on that would be great.
Chris, it's Jim. We do think the bond portfolio will continue to run down through the end of the year and generate cash. The way I think of it is that bond portfolio will essentially fund our loan growth between now and the end of the year, perhaps early next year. I wouldn't necessarily lean on the bond portfolio for anything related to the Direct Express program, which is really, again, a longer-term issue, and we'll certainly be buying securities by the time we have some type of longer transition for Direct Express. So I view the bond portfolio as more of a shorter-term tactic to fund our loan growth at this point.
Okay. And maybe, I'm not sure how much you can comment, but was it pricing? What was it that you think, having had this relationship for many years, what do you think it was that drove the decision not to be selected?
Chris, this is Peter. Quite candidly, we really can't comment and don't plan to comment on sort of what the decision process was or wasn't, that the physical service made. What we can tell you is that we did submit what we felt like was a very competitive bid with our full understanding of this program, like I said, for a long period of time and the complexities that come with it. So we're very proud of how we've managed this all of these years, and we felt very good about what we submitted as being the right thing for both parties and including the consumers. And at the end of the day, the decision process is sort of left up to the fiscal service, and not one that we're going to be able to comment on.
[Operator Instructions] Our next question today is coming from Bernard Von Gizycki from Deutsche Bank.
Could you just talk to your interest rate sensitivity analysis on Page 9 of the deck? You're liability sensitive and the forward curves have changed since 1Q. I wanted color on your underlying assumptions, just how we kind of think about it in the forward.
And then just -- I know you've kind of outlined about $100 million benefits from less drags and swaps in 2025. I'm wondering if there are any updates there?
Bernard, it's Jim. Yes, we are modestly liability sensitive. That liability sensitivity has increased slightly from the last quarter. I do think of it as largely interest neutral, but the liability sensitivity is growing just a little bit, which I think is a great position to be in at this point of the cycle. Obviously, the rate cuts that occur according to the curve in 2024 will be more back ended. So while it is a little bit of a lift for the 2024 projection, it's not a huge lift. It's really going to be more of a 2025 play. We did assume the June 30 curve in the outlook. So frankly, if we had updated that curve after the CPI report came out, it really wouldn't have moved the overall outlook materially. And again, that's because so many of these cuts are occurring late in the year.
Regarding the maturing swaps and securities, and we do have a slide in the appendix on Slide 23 that outlines the maturing swaps and securities. I have talked in the past about the fact that we expect to get about $100 million uplift from those maturities in 2025. Now that's a very simple calculation, assuming rates were to stay constant. If rates were to move, #1, it depends when rates move. We may take some of that benefit in 2024. So obviously, that will reduce the lift in '25. But in an absolute sense, you'd still be getting it. And that $100 million also assumes these maturities and rate movements occur in a vacuum. And as we know, nothing occurs in a vacuum. If rates do move down, other parts of the balance sheet are going to be impacted, including all the swaps that are currently on the books that are not maturing, they would certainly benefit.
So you have this $100 million of maturing swaps and securities in a vacuum. But all these other factors get rolled into what amounts to our modest liability sensitivity. And I would just say that if the balance sheet and rates perform as expected, we would probably get a little less than $100 million for those maturing swaps and securities, but you would likely make that up with our modest liability sensitivity. So you really get it one way or the other, assuming the balance sheet responds as we model it. But of course, we'll wait and see how things actually play out. But I think big picture, we feel pretty good about that number.
Okay. Great. And then just maybe following up on the noninterest-bearing deposits. I think it was mentioned, obviously, the continued cyclical pressure. But the narrative changed maybe a bit recently. And just wanted to get your sense on, would you expect like outflows to continue, would it be migration, would it potentially be slowing once 3, 4 cuts kind of occur? Because obviously, the rate differential is high. And even if we get 3, 4 cuts, it will still remain relatively higher than it has been over the past several years. So just wanted to get some thoughts on how you think that could migrate.
Sure, Bernard. We have been saying that as long as rates stay higher for longer, we do expect to see some modest pressure on noninterest-bearing deposits. I think that's natural with rates being at this level. I'll reinforce that we are at the apex of the cycle at this point. So this is probably where we're seeing this maximum pressure. And it's a little uncomfortable, but we do expect it to turn as rates move downwards in the latter part of the year.
In terms of the overall outlook, you see that our average deposits in Q2 were about $25.5 billion. We do think Q3 is likely to be slightly more than $1 billion lower than that. So that's just slightly below where we ended up on June 30. And we think that's the low point. We do see noninterest-bearing deposits for both seasonal reasons as well as rates moving down. We actually see a slight increase then in Q4, and we would expect to see those continue to increase as we move through 2025. So we absolutely seem to be at the apex of the cycle with maximum pressure on noninterest-bearing deposits, but we do see that turning later this year.
Your next question today is coming from Mike Mayo from Wells Fargo.
So you said you have industry-leading noninterest-bearing deposits to total of 40%. I think that's about double peer average, but that might be going lower. Just remind us, why is that so far ahead of peers? And what's in the range? What's been the low point of that over the last 2 decades? And what's in the high point? And where do you think that settles out?
Mike, it's Jim. Yes, we are very proud of that ratio. I would point to the fact that we have been very focused really for the last decade plus on payments and treasury management services. And we believe that is a huge driver and something that really differentiates us. I would put that as the largest factor. Certainly, our commercial orientation helps a little bit because we have noninterest-bearing deposits. But of course, you do offer a bit of an ECA or ECR on that, which is somewhat of a pseudo interest rate. But it's really part of our business model. We absolutely emphasize noninterest-bearing deposits when we extend credit. We expect to get the deposit. We expect to get the treasury management services. And those noninterest-bearing deposits tend to accompany those services.
Now where we've been in the past, we've been much lower than that in the past before some of the treasury management initiatives had ramped up. I would also say that in the past, we had a very high loan-to-deposit ratio, if we go back to prefinancial crisis, as many banks did throughout the industry. And so as a result, we were offering much higher interest rates, which created a little bit more migration. We don't think we're going to lean on broker deposits anywhere close to that as we did in the past. We expect our loan-to-deposit ratio to stay maintained. But I would say, in essence, it's our business model, and it's what we emphasize as we go out and solicit new business.
And just a follow-up. The competitive environment seems as tough as it's ever been for regional banks with a lot more bank expanding nationally. How do you see that competitive environment as it relates to the deposits and your deposit guide and your loan guide? Is this cyclical? How much of this might be structural? And at what point would you consider buying another bank or combining with other banks, given the change in these strategic environment?
Mike, this is Peter, and I'll comment first, and then I'll let Curt maybe comment on the strategic part of it. But I think from a competitive standpoint, we actually feel that's where the diversity of our model is just terribly compelling. A number of regional banks are expanding nationally. We've been national for a long time. We've been in California for a long time in Texas, Michigan. We're expanding in the Southeast. But I think our national presence has been very helpful when it comes to competitiveness on deposits. So what you're trying to raise deposit-wise in Michigan versus California versus Texas gives us lots of options.
We also have a number of businesses that really are national businesses like our TLS business, our Financial Services division, where we're able to attract customers and deposits in different ways that don't necessarily tie us to let's say, CD rates in the small part of Texas, for example. We've got a lot of handles that we're able to pull.
So I totally agree with you. It's about as competitive as we've seen it in a long time, not just on deposits, really on loans and pricing and structure, across the country right now, it has picked up a lot in the last quarter. But I think that, again, the diversity of our model, as we've tried to continue to communicate, is just terribly compelling and gives us a lot of advantages in competing with regional banks, community banks and the larger banks.
And so Curt, I might flip to you.
Yes, Mike, thank you for the question. And on the strategic side, we have been a very patient acquirer. We have done one acquisition in the last 20 years, have continued to lean into our organic growth model. And the last couple of years, we've seen nice growth on the asset side from the lending perspective and just expansion of our customer base. And we think we continue to have really good opportunities to grow in all the markets that we operate in as well as the markets that we've expanded into more recently.
We'll have to wait and see how the environment unfolds. Thus far, it's been an environment with not a lot of M&A occurring because of a lot of uncertainty around regulation and economy, et cetera. But certainly, it's something very strategic, cultural sense for us and was a good fit. We would take a look at it in one of our primary geographies. But again, that would not be our primary focus. Our primary focus continues to be on organic growth, and we think we have really good opportunities there.
Next question today is coming from Manan Gosalia from Morgan Stanley.
Apologies if I missed this in your prior remarks, but can you comment on your conversations with customers on when loan demand can really start to come back, right? So I think pipelines are pretty robust. But across the industry, loan demand has been weak. Is it lower rates that are going to bring back that demand? Is it some of the uncertainty with the elections, et cetera, going away? Can you just talk about what your conversations with customers have been?
Manan, it's Peter. I guess the answer to your question, it's probably a little bit of all the above. I think in our surveys with customers, we get the sense that the #1 driver of loan demand impact right now is interest rates. And we believe that, to the extent that we start to see some reduction in rates that, that would impact loan demand or lead to hopefully some more loan demand.
And then I would acknowledge, and I believe that when you talk to customers, there's just sort of a -- I'd call it a wait and see a little bit as to what -- how the year is going to unfold when it comes to, as Curt said, the regulatory environment, get through the elections. And I just, I feel like historically, that's a theme I've heard during presidential election years for a long time, that most of your owner-managed businesses kind of want to wait and see what things are going to look like after November. And then they start to make decisions.
So to your point, and I know a number of banks have been talking about this. We feel like we've got a good outlook for the second half of the year. We're still showing positive point-to-point loan growth for 2024 overall. But I think probably real demand doesn't pick up until you start to see interest rates come down and we get through the election.
Got it. And maybe on the credit side. I know nothing notable to call out this quarter. Criticized assets moved lower. But the investor conversation has pivoted to some concerns around credit on C&I side as opposed to CRE. Anything specific you're seeing there or anything you're hearing from borrowers? And I think as growth starts to slow in the economy, how do you think that impacts the credit of the portfolio overall?
Manan, this is Melinda. Yes, obviously, we posted a pretty nice quarter. And honestly, in the C&I book was really where we saw the improvement. It was pretty broad-based across a number of different industries that are sort of embedded in core middle market. So at this point, I'm not seeing -- we're not seeing any trends in any one particular segment. Now having said that, customers that are exposed to the consumer, the B2C type companies, service-type companies are a little bit more challenged and probably going to be a little bit slower to show some improvement if they're in that nonpass category. But we feel really good about C&I. And quite frankly, they have navigated this high rate environment by, quite frankly, managing cash flow really tightly. Obviously, utilization is low. So that's probably where some of the deposits have gone quite frankly because they want to utilize cash in the most efficient way, and that is to pay down high-cost debt.
So I feel pretty good about the C&I portfolio. That does not mean that we're not going to continue to see some manageable level of migration. And there could be some idiosyncratic events that impact a particular customer. Commercial real estate, obviously in a lot of focus, but our portfolio continues to perform quite well. It was very stable this quarter. We continue to experience no delinquencies and no losses in our senior housing portfolio, which was stressed because of rates, but also just the environment for housing coming out of COVID. It's very elevated from a nonpass credit perspective, but is very stable at this point. So not seeing any major cracks. As long as the economy continues to sort of chug along at that soft landing strategy, I think we'll be okay. And we're well reserved if there is any issues that arise.
Our next question today is coming from [indiscernible] from UBS.
I just wanted to go back to the loan demand and loan growth commentary a little bit. So I'm trying to square what you said about how November is sort of the key catalysts here. And at the same time, obviously, the guide sort of assumes that second half, there is a ramp-up in loan demand. So could you just help us understand, I guess, how much of the expected sort of demand pull-through is 4Q? Or is there something in the pipeline that you already see that makes you comfortable that we could see something happen in the third quarter as well?
Yes, [ Sam ], I think I would still say, though, that probably the #1 factor is interest rates. And I think that November would be the secondary factor to that. And I guess I would just say that as we see our pipelines as we sit right now, that's kind of where we're coming up with this 2% point-to-point loan growth. We had a great quarter of $1 billion and point-to-point loan growth. And so what we see for the rest of the year is that, that should be able to continue, and we're encouraged by what we see.
And I would tell you, it's pretty broad-based across our businesses. That growth last year, we had a number of businesses that we we're sort of rationalizing, if you will, getting through everything that occurred in 2023, and much of that is now picking back up. And I think that as we get into the second half of the year, the realization of that pipeline growth will start to be there. But I don't think it's going to really, really pick up, as I said, until we do start to see some interest rates come down.
So as we sit right now, our managers forecast, we feel really good about how the second half of the year looks on the outlook that we're showing.
Got it. And just my follow-up is around the noninterest-bearing deposits. And maybe a bit more looking into 2025. I just wanted to get a better sense for what would need to happen in your mind to actually see meaningful dollar balances move into the bank? I'm trying to get a better sense for it? Is it just simply rate cuts? Or are there some increased leverage components that we would need to see before the dollar pull back into these accounts?
Sam, it's Jim. Of course, we're not offering any specific 2025 guidance at this time. But I would say it's really a function of 3 things. One, the rate environment. We typically do see noninterest-bearing deposits grow, all things equal, as rates start to come down, so that's certainly a factor. Business activity, again, going back to answering Mike Mayo's question. Noninterest-bearing deposits are certainly a point of emphasis for us. And then just overall economic growth as GDP grows nominally. And it does look like we're going to have some decent nominal growth in 2025. You typically expect money supply, working capital levels within middle market businesses to grow proportionately with that.
So we do think a number of factors are pointing the right direction for noninterest-bearing deposits to start growing again, inflect later this year and then start growing in 2025. And so we feel like, again, we're going -- right now, we're somewhat in the apex of that cycle, but we see some real strong tailwinds for us and any really commercial bank as we move through 2025.
We reached the end of our question-and-answer session. I'd like to turn the floor back over to Curt for any further closing comments.
Well, as always, thank you for your interest in Comerica, and we hope that you have a good day. Thank you.
Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.