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Comerica Incorporated at Lehman Brothers Global Financial Services Conference - Final.

Article Excerpt
JASON GOLDBERG, ANALYST, LEHMAN BROTHERS: We're going to get going here because we don't want to fall behind. Next up we're very pleased to have Comerica. Comerica is a name that's really benefited over the years from kind of focusing on particular geographies and certain customer niches. Not trying to be all things to all people, but rather focusing primarily on the middle-market commercial space and the upper end of the retail segment and kind of its traditional Midwest markets and really doing a nice diversification over the last couple of decades into California, Texas as well as Florida.

From the Company we're very pleased to have Chairman and CEO, Ralph Babb; Beth Acton, Chief Financial Officer; Dale Greene, their Chief Credit Officer; and Darlene Persons, Director of Investor Relations. With that let me turn it over to Ralph.

RALPH BABB, CHAIRMAN, CEO, COMERICA: Thank you, Jason. Good morning, everybody. As you all are well aware, the entire financial sector continues to grapple with challenges in the current economic environment and the rocky market conditions, as you all have been talking about for the last couple of days, so I'm not telling you anything new there.

However, we've remained focused on executing our strategy and our second-quarter core operating earnings remain stable. The credit issues we have experienced in the last few quarters are primarily focused on our residential real estate development in California. Our capital position remains solid and, furthermore, we have instituted a capital optimization plan which we believe will assist us in further improving our capital ratios. I will provide detail of this plan later in my presentation.

Before we get started I would like to remind you that this presentation contains forward-looking statements and in that regard you should be mindful of the risks and uncertainties that could cause future results to vary from expectations. I refer you to the Safe Harbor statement as shown on slide 2 which I incorporate into this presentation.

For those of you who are new to Comerica, slide 3 provides a brief overview. Comerica is over 150 years old and we rank among the top 20 largest banks in the US with $66 billion in assets. In short, we have the size and scale and market position to be an increasingly important regional player in some very attractive markets, specifically California, Texas, Florida and Arizona.

As I just mentioned, one of our goals is to diversify our customer base. As you can see on slide 4, we continue to make steady progress towards our goal of achieving more geographic balance with markets outside of the Midwest now comprising 63% of our average loans. Much of the success we've experienced in our growth markets can be attributed to our relationship banking philosophy. This combined with our ability to provide the broad range of services of a big bank, but with the feel of a smaller community bank helps to foster long-term deep relationships with our customers.

Year-over-year second-quarter average loans outstanding were up 5% faced by an 18% increase in the Texas market. Overall loan growth slowed in the second quarter as we worked to optimize capital and have been selective in terms of new business in the very volatile and challenging economic environment. In fact, period ed loans declined about $600 million from March 31 to June 30.

Slide five provides a breakdown of our loan portfolio by line of business. As a traditional commercial bank our credit culture is assisting us in working through the current difficult economic situation. This strength is demonstrated by the solid credit metrics we have posted over the past several years. What is really noteworthy is that this has been accomplished while Michigan struggles through its fifth year of recession and the automotive sector has been in restructuring mode for the past eight years.

One of our key competitive advantages is our relationship banking philosophy. A lot of banks talk about relationship, but at Comerica it really means something. On slide 6 we outline some of the recent recognition we have received for our excellent customer service. We placed first in O'Connor & Associates' survey for the first half of 2008 with the highest score achieved in the nine-year history of the survey. We also received four awards for excellence in serving small businesses from Greenwich Associates. The social security card program is ramping up and we are pleased with the level of deposits we are garnering.

We continue to meet the needs of our customers as well as build deeper, more profitable relationships by introducing new and enhanced products. On slide 7 you can see several of the products that we introduced recently. We're seeing great acceptance of these products, partially as a result of the excellent training and incentives we provide to our banking center colleagues and commercial relationship managers cross-selling the banking products.

Slide 8 shows the excellent loan growth momentum we are achieving in Texas. In March 2007 we announced the relocation of our corporate headquarters to Dallas. The relocation helps advance our strategy to diversify customer base and extend our reach into the high-growth markets. Comerica has had a presence in Texas for over 20 years and we now are the largest banking company headquartered in that state. That is an important differentiator. We expect that the Texas economy will continue its outstanding growth record and real GDP growth should continue to outpace the national average.

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