Comerica Incorporated (CMA) Earnings Call Transcript & Summary

All right. We're going to get started. Up next, we are excited to have Comerica joining us once again. The bank did an outstanding job staying in front of its customers during the downturn, and this is evidenced by the surging deposit growth it's experienced. And at the same time, it's continuing to have a tight hold on expenses. More recently, it seems highly optimistic on the return of growth and should benefit more than most when interest rates do eventually rise. Here to tell us more about the strategy is Chairman and CEO, Curt Farmer. Curt is going to go over some slides and then we're going to have a Q&A. Also here with us, CFO, James Herzog. And also joining us is Executive Director of their Comerica Bank, Peter Sefzik. With that, I'm going to turn it over to Curt.

Great. Thank you, Ryan. Good morning, everyone. It's a pleasure to be here with you, especially face-to-face after everything we've been through the last 2 years. Before we get started, I'd like to remind you that today's presentation may contain forward-looking statements. I refer you to Slide 2 for our safe harbor statement, which are incorporated into this presentation as well as our filings with the SEC, for factors that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the date of the presentation, and we undertake no obligation to update any forward-looking statements. We provided a brief overview of Comerica on Slide 3. With $95 billion in assets, our size allows us to be nimble and efficient. We are a leading bank for business with over 90% of our loans to commercial entities, complemented by very strong retail bank and wealth management capabilities. Our long-tenured employees have deep expertise in the industries they serve, which include several faster-growing areas such as environmental services, equity fund services and entertainment. Also, we deliver high-quality financial products with a goal of building full, long-lasting relationships. As you can see on the charts on the right, we have a unique geographic footprint with locations in 7 of the top 10 fastest-growing metropolitan areas, which provides significant growth opportunities. These strengths enable us to deliver shareholder value by maintaining a sustainable, competitive advantage and have driven our success for over 170 years. On Slide 4 is our mid-quarter update on loans, which is based on preliminary results through the end of November. Excluding the decline in PPP loans, we had solid loan growth in several businesses. The largest driver, once again, is general Middle Market, which is up over 3% on average relative to the third quarter. In addition, large Corporate has increased nearly 8%. Partly offsetting this growth, were declines in mortgage banker and commercial real estate. Also as expected, PPP loans declined about $890 million. Quarter-to-date loan performance is very much in line with the outlook we provided in October. We believe the fourth quarter average loans, excluding PPP, should be stable at the current level, with the potential for typical pickup in growth as we approach year-end. As we look forward to next year, loan growth from year-end '21 to year-end '22 is expected to be relatively strong, supported by our robust pipeline and outlook for continued economic growth. We are forecasting just under 5% real GDP growth for the fourth quarter and full year 2022. Furthermore, over the next year, we expect the state-level economies in each of our 3 major markets to outperform the national rate. Concerning loan yields, while the current low rate environment has been mostly absorbed, some challenges remain. In the near term, we expect pressure from decreasing PPP loans, maturing swaps as well as our ability to preserve rate forwards in a competitive environment. Of course, rising rates and loan growth are possible countervailing factors. Slide 5 provides further detail on loan trends for the first 2 months of the fourth quarter. Excluding the decline in PPP loans, we've had good momentum in several business lines, and we expect headwinds to subside in certain areas. Starting with our largest business segment, General Middle Market had 8 consecutive months of growth. Increasing working capital requirements are being driven in part by higher commodity prices and rebuilding of inventory levels. M&A and dividend or equity distributions are also drivers. However, there are some headwinds, mainly related to supplier chain disruptions, and in some cases, excess liquidity, which might tamper borrowing. But overall, our customers remain optimistic and that is reflected in our pipeline and growing loan commitment levels. Over the past year, we've had great success in our equity fund services business, where we provide [ capital cards ] and subscription lines to venture capital and private equity firms. Average loans are up thus far 15% relative to the fourth quarter last year. The pipeline is very strong and activity remains high. Also, we're seeing larger fund sizes resulting in more syndication opportunities. Our Entertainment division has had strong growth this year as a result of the need for content after slow production in 2020. We continue to add new relationships, resulting in record loans and strong syndication activity. On the other side, our loan performance has been hampered by some unique headwinds that we believe are abating. PPP loan forgiveness picked up significantly midyear, and we expect balances of less than $500 million at year-end. National Dealer Services floor plan loans are extraordinarily low and close or at the bottom due to supply constraints. Quarter-to-date average floor plan loans were only about $500 million relative to the typical historical run rate of about $4 billion. We expect inventory levels will slowly rebuild over the next year or so as supply issues are resolved and pent-up demand is satisfied. Finally, Mortgage Banker reached record levels at the end of last year, primarily due to the refi boom along with strong purchase activity. Volumes have slowly declined over the past year, and we expect this trend should continue for the next few quarters. However, we should fare better than others in the space given our higher mix of purchase refi -- purchase relative to refi volumes. In summary, the diversity of our business mix, combined with our geographic footprint, should help us achieve consistent, sustainable growth over time. Turning to our mid-quarter update on deposits on Slide 6. Average deposits again set a record with an increase of over $5 billion quarter-to-date. This is due to our customers' solid profitability and capital markets activity as well as liquidity injected in the economy through physical and monetary actions. Majority of our deposits are noninterest-bearing, which contributed to us having the lowest total deposit costs among our peers in the third quarter at just 3 basis points. We expect average deposits for the fourth quarter to remain seasonally strong and believe they will continue to remain elevated for the near future. As deposits have continued to rise, so has our excess liquidity to levels well above our historical average, as shown on Slide 7. We put some of that cash to work by gradually increasing our securities portfolio over the past year, which has had the added benefit of muting some of our growing asset sensitivity. On an average basis, we've been adding about $500 million or so per quarter. This has allowed us to mitigate the headwind from lower yields, resulting in a relatively stable securities income over the past couple of quarters. MBS purchases so far this quarter have average duration of around 7 years and yields averaging 190 basis points compared with securities rolling off with rates over 200 basis points. We expect the income from the growing portfolio to roughly offset any pressure from lower reinvestment yields. Slide 8 reviews a couple of factors that are central to our asset sensitivity and resulting in us being more asset sensitive than our peers. Due to the commercial nature of our business, our loans reprice quickly. In fact, over 3/4 of our loans are floating rate, of which about 65% are LIBOR-based, predominantly 30-day LIBOR. As far as deposits, 53% are noninterest-bearing. The value of our deposit base is expected to increase substantially when rates rise and provide a great source of low-cost funding. Turning to Slide 9 and our models that forecast the benefit of rising rates to net interest income. Our asset sensitivity has increased over the past year, mainly as a result of strong deposit growth. The standard model assumes a nonparallel rise in rates with a dynamic balance sheet as outlined. At the end of the third quarter, we estimated $188 million or 11% increase in annual net interest income over 12 months as rates rise gradually, 100 basis points. We are also -- we also show several alternative assumptions to our standard case, including varying deposit betas, rate changes, and securities portfolio size. In all cases, our asset-sensitive balance sheet remains very well positioned for rising rates. Recently, we opportunistically added $3 billion in forward-dated swaps with durations of about 3 to 4 years at an average yield of about 140 basis points. This is expected to partly offset the impact of maturing swaps next year. We plan to gradually reduce our asset sensitivity over time as market conditions allow. And as rates rise, we will probably pick up the pace. In addition to help neutralize our asset sensitivity, we are -- our natural asset sensitivity, we're aiming to deliver a more balanced and diverse revenue base. Our success is demonstrated on Slide 10. For 5 consecutive quarters, we have achieved increases in noninterest income, and it has been broad-based. On a year-to-date basis, third quarter net noninterest income was up 13%. I'll highlight a couple of the products. Our card platform provides about 1/4 of the bank's fee income. Card has increased 15% in the first 9 months of the year over the same period a year ago. We've seen growth in all card products, with the largest driver being prepaid government card activity. Economic stimulus, changes in customer behaviors as well as new and expanded customer relationships has spurred activity in all card segments. In the near term, we believe we may see some card fee decreases modestly for a quarter or 2 as the benefit from growing merchant and corporate volumes could be more than offset by lower government card activity and stimulus-related volume declines. Fiduciary services comprise over 20% of noninterest income and reached a record level in the second quarter. Continued growth of our unique Advisor Solutions business, along with strong market performance, has driven 9% growth in the first 9 months relative to the same period a year ago. We expect it will be challenging to repeat some of these high fee levels, particularly in light of the accommodative environment experienced in 2021. However, we believe our robust product offering and talented team will assist us in achieving sustainable fee income growth over time. Our expense discipline is well ingrained and is assisting us in navigating this low rate environment as we invest for the future. We have increased our productivity and effectiveness over time, as illustrated by the metrics on Slide 11. Our performance compares well to our peers. As we look forward, we expect performance-based compensation to normalize in 2022. However, staffing levels are expected to return to pre-pandemic levels, and inflationary pressures could impact a number of line items, including salaries. Also, we are focused on product and market development as well as driving efficiency through continued investment in technology. By carefully managing our expenses, we have the wherewithal to invest in our future and attract strong talent, which is key to developing deep, loyal customer relationships. Our technology evolution is focused on 3 priorities, as outlined on Slide 12. We are building a scalable cloud-first platform that will allow us to deliver services to our customers and colleagues with greater speed and agility. We have migrated more than 60% of our business applications to a public cloud or software [ ASA service model ]. We have closed one data center and on track to close a second data center by the end of the month. Also, we are modernizing our core platform to drive greater operational excellence and empower our colleagues to serve our customers better. We are currently investing across our business, including migrating our GL to an industry-leading cloud-based solution, upgrading our core commercial loan servicing platforms, refreshing our banking center teller platform and building next-generation digital and data platforms. Finally, we are evolving our digital capabilities to deliver more convenient customer experiences and faster customer outcomes. We're leveraging a modern set of digital and digitization tools to reimagine and reengineer critical customer journeys and to make it easier and more flexible to our customers to do business with us. Overall, our technology investments are enhancing the customer and colleague experience, helping to attract and retain customers and improving colleague efficiency. Slide 13 provides an update on capital management. As always, our top priority is to use our capital to support our customers and drive growth, while providing an attractive return to our shareholders. We continued our share repurchase program this quarter and repurchased 460,000 shares for $50 million. We will continue to keep a close eye on loan growth trends and capital generation as we manage towards our 10% CET1 target. In addition, we have maintained a very attractive dividend yield. In closing, Slide 14 outlines Comerica's key strengths. Our expertise and experience help us build and solidify our long-term relationships, particularly in extraordinary times like these. We are committed to maintaining our strong expense discipline, while investing to provide a high-caliber customer and colleague experience. Our disciplined credit culture and strong capital base continues to serve us well. Finally, we are uniquely positioned with our nimble asset size, geographic footprint and very strong deposit base. These key strengths provide the foundation for building long-term shareholder value. Thank you for your time. And Ryan, we'd be happy to take some questions.

Great. Maybe to just kick off, you obviously gave a loan growth update that had a lot of puts and takes. But if we remove the impact of PPP, it seems like we're seeing really good momentum in the business. Can you maybe just talk, one, what are you seeing geographically? And then second, any thoughts, either on the impacts that supply chains you're having on your clients, whether it's Middle Market or floor plan? And what are your expectations for some of these things easing? And what do you think it could mean for borrowing over time?

Yes, Ryan. So on the first one on the geographic markets, just about all of our geographies are performing really well. The pipelines are good. Michigan has done fantastic this year, and Texas as well. California has been probably our third market in that, but it's been a great deposit growth market. But overall, geographically, and really across all of our lines of business, we're seeing a lot of good opportunities, and that feels really good. As far as supply chain goes and what does that look like into next year, I mean, I think that we're all seeing a lot of the same data that you guys are. We feel like it will abate. We feel like things are going to get better. We're hearing that from customers that eventually this thing is going to work itself out. I think it's probably second, third quarter before you start to see some relief there. I don't know that, that means in the dealer floor plan. I think that's more across the sort of general Middle Market, if you will. So that would be the answer on that.

So Curt, when I think about it, we've -- you spent the last 2 years mostly managing through the pandemic. Obviously, there's been a lot of things still going on at the bank. And hopefully, with that behind us, you're pivoting more towards growth initiatives. So Can you maybe just talk about what you think of the 2 to 3 key growth priorities and how you see this impacting revenue growth in 2022 and beyond?

Yes. Thank you, Ryan. You're right. It has been an interesting environment to manage through. But we've continued to make good progress on growth initiatives across the company. A lot of those, as I said in my comments here a few minutes ago, have been focused on generating more fee income as an organization. So we've been doing a lot around the digital side of treasury management. We've got really great products there, but how do we deliver them quicker and in a more digitized manner for our customers and create a more digital experience for CFOs and treasurers, et cetera. We're investing heavily into our full suite of capital markets sort of capabilities for our commercial clients. We continue to build scale in the wealth management space. We made a small tuck-in acquisition on the trust side in that space during the year and have done some team lift outs, et cetera. And it's strengthening sort of our investment management delivery there. So a lot of investment on things that are continuing to drive fee income for us would be sort of priority 1. And then second, we have been opportunistic around some market expansion opportunities. That would include establishing a foothold in the Southeast market with our new commercial banking teams in North Carolina. We've also added some wealth management colleagues to complement those individuals as well in North Carolina. And we see that as really a chance to not just penetrate the Carolinas, but more broadly in the Southeast over time. And we've been opportunistic just around some team lift outs and some hiring across our footprint in both the Comerica Bank and in Wealth Management. And then lastly, I just would say that we're always focused on the intersection between our businesses, and how we do a good job of -- we do a good job, but how we can do even a better job of the intersection between those business lines, the collaboration between the business lines. Referral opportunities between the Comerica Bank and Wealth Management, for example.

Peter, I thought Curt was going to give us 2022 loan growth guidance when he said '21 to '22 is going to be very strong. So I will ask you in the context of relatively strong, what do you expect to be the main drivers of growth? And what are some of the puts and takes? And what are some things that could drive that to be stronger than we may be expecting?

Well, I think the slide that we show in there were year-over-year growth that we have seen. I think that we will see that going into next year. I'm encouraged that we will. And I also think that some of the headwinds we've had with dealers, energy seem to be abating on our overall portfolio. So again, it feels like across the Board, we're in some really, really good businesses that are going to see growth into '22, that I think would be equivalent to what we've had so far. It would be exciting to see a year from now, 9% growth in Middle Market year-over-year. I think that's pretty outstanding for our business. And I think we're in a position to keep that going. Of course, there's always going to be -- it feels like the overall environment is getting better. Is -- can something happen obviously with the virus that sets that back or any other changes, then obviously, we'll navigate that. But yes, I think year-over-year loan growth expectations feel really, really good. And I think that one slide that we show, you take PPP out, maybe dealers reach the bottom and starts to creep up, and energy, it feels like a business that has a kind of reached the bottom as well. So...

So following up on something that Curt mentioned in the prepared remarks, you talked about pressure from PPP swaps, but you also mentioned harder to get floors. But despite this, you still do some pretty optimistic on loan growth. Can you maybe just talk about the competitive environment? Obviously, there's a lot of banks out there that are trying to grow right now. And where are you seeing the most competition across the lending business? Are there any areas that are intensifying?

I think we've see it all the time in every market that we're in. And you're right, there is a lot of new entrants, but there's also a lot of disruption that has occurred in the market. That's allowed us to pick up some new talent, in some cases. It has also allowed us to pick up some new customer relationships. We don't have to win every deal. We just have to win the right deals. And we are focused always on our existing customer base and selectively adding high-quality names to our book, especially where we feel like we can build a long-lasting relationship in the space. And there are many business lines in many geographies where we have a very dominant position today.

So I want to make sure we get Jim in the mix here. But -- so Jim, you've managed to keep core NII. You and the team have managed to keep core NII stable in, obviously, a very challenging rate backdrop. Well, I'm sure we'll get formal guidance in January. Can you maybe just talk about some of the puts and takes? And how you're thinking about managing NII into 2022?

Yes, Ryan. We have weathered most of the low rate environment, as Curt mentioned. We see the potential for 2 very strong tailwinds in 2022. First, Curt talked about our asset sensitivity, which has been growing despite some of the actions we've taken to mute it. It's a very good thing. Deposit is driving a lot of that. But certainly, interest rate movement could be a very huge tailwind. When I think about interest rates, it's both short-term rates, of course, which we're very tied to in the loan side. But even on the long end, people expect short term rates to go up later this year. We should see the long end of the curve inch up, giving us more opportunities to add securities to the portfolio, adding some swaps to the books. So certainly, interest rates could be a very significant tailwind. The other, of course, is loan volume. And Peter talked about this. I'm not giving guidance as you referenced. But between the dealer floor plan bottoming out, some of the other headwinds bottoming out, the very strong pipeline, the strong GDP growth that Curt mentioned, we do see potential for very strong loan growth next year. And that's likely to be the largest factor in terms of driving net interest income. We will have a couple of moderate headwinds that will partly offset all that. We do have some swaps maturing in 2022. Now we did offset about half of that headwind with the recent forward starting swaps we put on. And if rates go up just a little bit more, we may be able to offset all of that headwind, if not more so. And then we do some customer LIBOR floors that we've been very successful with. Very beneficial to the Bank over the last couple of years. We're still having success in getting them, but not quite at the same rate, maybe not quite at the same level. But that may not matter as much if rates go up anyway. But we do expect that to offset some of the tailwinds we're going to see. The big picture, we just see tremendous potential, both from the interest rate environment and loan growth.

So one of the discussion points that I've had many times with investors on Comerica is that the balance sheet is too rate sensitive. And when rates go up, earnings go up and the stock goes up. And obviously, the reverse happens when rates go down. So one of your -- in one of your recent presentations, you listed some ways that you're thinking about reducing sensitivity. And Can you maybe just talk about your strategy of how you plan to reduce the volatility from rates? And maybe provide us with a framework of what you would like your hedge program to look like? And will it be more driven by swaps versus securities?

Yes. Well, we would certainly agree that we're to asset sensitive, and that's one of our objectives is to smooth that out. Curt mentioned the higher percentage of LIBOR-based loans that contribute to that. But I always like to note, too, a lot of its deposits, and it's a function of a very strong treasury management franchise. And that's actually a very good thing. But with that said, we are very committed to smoothing out the earnings stream and taking away all that -- a good part of that asset sensitivity. We'll probably never get rid of all of it, again because of the business model. But I think we can eliminate the vast majority of it. We've already taken steps. And our overall strategy is to make steady progress in a very measured way. We're not going to sit and do nothing even if rates are relatively low by historical standards, like they are now. But we're not going to put all the chips on the table at once either. So we'll make steady progress over time. I think we've already done that in the sense that we've been adding to the securities portfolio for about 5 quarters now. As Curt mentioned, we added $3 billion of forward data swaps very recently. And the tactics we're actually eating into this asset sensitivity will simply depend on market conditions and our liquidity profile. Up until now, we saw the relative value in adding securities to the portfolio given the abundant liquidity and the yield differential. But we are starting to pivot to the point, as you saw with forward-dated swaps, where we're probably going to be doing a little bit of both during 2022. And then as rates go up, as Curt referenced, we'll actually weigh into this a little more heavily from a volume standpoint. And importantly, to me, we'll also probably extend the duration as rates start to go up, especially on the swap side. So again, somewhat dependent upon market conditions and liquidity profile. But we feel like we have some optionality there. The liquidity gives us a lot of leeway in terms of what we do, and we feel really good about that.

Just in terms of the liquidity with the deposit growth that you've just brought in, I mean, I'm guessing the cash is up to almost $30 billion. And pre-pandemic, you were running at 2% to 3%. I know these are rich people's problems. But do you have a sense of how much of this could be temporary? How much of this will end up sticking around? And how do you think about ways to deploy it, securities versus loans over time?

Yes. Well, of course, first priority is always loans. That's -- customer relationships are very important. And frankly, that's how you bring in the deposits is customer relationships. So loans will always be the first option there. But to the extent this sticks around, securities are certainly a very strong option also. We do think the majority of this liquidity is going to stick around, especially if rates stay low, the Federal Reserve continues with putting liquidity into the system. I always say that tapering is just that, it's tapering. It's not reversing the balance sheet. And we don't think the Fed is going to significantly unwind its balance sheet. I think fiscal spending will keep the velocity of money high. So overall, we see deposits staying strong in the system and strong at Comerica. We did get some seasonality in the fourth quarter. We saw a nice step up in deposits, and a lot of seasonality trends across the Board have been somewhat drowned out or muted by the pandemic. We weren't sure what to predict there. But it seems like the typical seasonality came on [ steroids ] this time around. We do think some of that seasonal deposit that we saw in the fourth quarter, we do think some of that will dissipate in the first quarter of next year. We do think we have a moderate amount of deposits that are still residual from the stimulus programs, but that's really a kind of small potatoes compared to the larger picture that we expect most of these deposits to stick around as long as rates are low. Now as rates start to rise, as always, you'll start to see these slip off balance sheet across the industry and the off-balance sheet money market funds. But even then, with all the liquidity in the economy, I don't expect deposits to go back to the pre-pandemic level. So as you say, it is a bit of a rich man's problem.

Curt, I think you mentioned in the presentation, performance comp to normalize but higher staffing, and also inflation. And I think at earnings, you talked about inflation being maybe roughly a 1% headwind to expenses, and you're still trying to grow across the organization. I guess a two-part question, just given it seems like inflation is going to be stickier than we thought, are you seeing upward pressure from inflation across your business? And what are some of the other big, moving pieces on the expenses to think about as we move into '22?

Well, I'll share a couple of thoughts on it. Jim, if you've got things you want to add. But we -- from a tailwind perspective, we did have a higher performance compensation, as I think the whole industry did in 2021. So that will benefit us going into next year. But on the flip side of that, some of the expense pressure that we will feel relates to labor. And we are down about 300 headcount in 2021 over 2020. And some of those are positions we need to refill, so our vacancy rates have been higher. And we are feeling the normal wage pressure that almost every industry is feeling, in addition to financial services. And so we're going to make sure that we're taking care of our people and that we're being competitive, and that we're filling positions as appropriate. And there may be other inflationary pressure and other vendor relationships across the Board yet to be seen, but I'm expecting that some of that will play out. We're going to continue to invest in our technology projects that we have going on right now. And then we're expecting travel and entertainment, some of those things, to come back into vogue as well. We're going to travel to see our customers and do the right thing and getting out in front of customers and et cetera. So they're coming off of a highly unusual environment in the last 2 years, we are expecting to see a little bit rise in interest rate -- or a little bit of rise in expenses in 2022.

Jim, putting you on the spot, can the Bank generate positive operating leverage in 2022?

Well, of course, PPP, you have to pick it up, and put it totally to the side. With that said, I do think that it's very possible. It is going to be largely dependent upon the interest rate environment and loan growth. The same things that drive net interest income will drive the positive operating leverage, and I see the potential for strong operating leverage there. But it is going to hinge on those 2 factors.

So Curt, I felt like there was a couple of moments in time before the pandemic that you were getting a little bit more interested in M&A. Maybe that was me reading the tea leaves. And we've seen a lot of other banks do acquisitions. You guys obviously haven't done anything since -- on the bank side since Sterling. I'm curious, how has the thought process evolved regarding potential bank acquisitions versus also nonbank acquisitions? And second, just given the rising cost of technology for the industry, you guys seem to be ahead of the curve, you articulated on the slide. How do you weigh an organic strategy versus the potential for you to partner with some smaller banks to take advantage of the investments that you've made?

Well, I don't think anything's really changed for us there, Ryan. Maybe I was giving you the wrong tea leaves at some point. But our strategy has always been built on organic growth. And given our commercial orientation, we believe it's better to home-grow talent, to acquire talent where it makes sense for us to do so. We're having good opportunities there, for example, in our Southeast expansion. And we think we can continue to grow organically really on the course and path that we're on. We've been a very patient acquirer. We've said previously, if something made sense in [ near ] Texas, California, predominantly, that we would take a look at it. But it would have to be very strategically, culturally aligned with the company. And so we believe that our organic opportunities are much greater than inorganic opportunities right now. And we don't want to get distracted by some sort of M&A activity. Having said all that, you might see us do some tuck-in acquisitions on the fee income side, if it makes sense for us to do so. We purchased the small trust business earlier in the year. And things in sort of the Wealth Management, capital markets type arena, maybe treasury management or card would be things that we'd be interested in.

I have one more question I wanted to ask Jim regarding capital. You guys have stuck with the 10% target, which I think is on the higher end of the peer group despite I think what most of us consider to be a pretty low-risk balance sheet. And I know you've talked about once you reduce the earnings volatility, we could think about lowering the capital targets. Do we have to actually fully go through that transition before we could potentially think about it? Or can we see them -- can there be a journey where both things happen along the way?

Yes. Well, it's something we're always looking at and ultimately in the Board's purview. But for the most part, I think we have to get a good part through the next rate cycle. Because as I mentioned earlier, we're not going to lay all the chips on the table at once. We're going to gradually weigh into it. And I think once we've muted much of that asset sensitivity, that will be a nice box to have checked, and take a look at the capital stack and what can be optimized.

Maybe one last one for Peter in the last few seconds we have here. So you mentioned that dealer is probably close to a floor. It was back up -- it was at $4 billion not too long ago. And I don't know what $500 million correlates to in terms of days of inventory. But if you think about where we were at the peak, when you're out talking to dealers, where do they think they're going to get back to? And do we need to actually see demand slow for that to happen?

Well, you get differing opinions. I think what we're thinking is that inventory days instead of being 90, will probably be more in the 45 to 60 range. I mean today, they're in the teens at best. And so we think it's not full, that $4 billion. We think it's some shorter version of it. And -- but I think it's another year to 18 months before the floor plan environment works itself out, the supply chain and everything else that's going on.

Great. Well, we are out of time. So please join me in thanking the Comerica team.