Comerica Incorporated (CMA) Earnings Call Transcript & Summary

All right. Up next, we have Comerica. I'm going to get disclosures out of the way first for important disclosures. Please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosure. The taking of photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that out of the way, we're delighted to have with us today at Comerica. We have Curt Farmer, Chairman and CEO We have Jim Herzog, CFO; and we have Peter Sefzik, Chief Banking Officer. Thanks so much for joining us. To start, I think, Curt, you have a few prepared remarks. So I'll hand it over to you, and then we'll move over to Q&A.

Well, thank you very much. And I believe there's a slide deck that you can access. We don't actually have slides behind us here. But 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 I incorporated in this presentation as well as filings with the SEC for factors that could cause actual results to differ materially from expectations. Forward-looking statements speak only as the date of this presentation, and we undertake no obligation to update any forward-looking statements. Also today's presentation will reference non-GAAP measures. And in that regard, I direct you to the reconciliation of these measures in the presentation slides which will be posted on our website, comerica.com. Slide 3 reinforces our differentiated value proposition. As a leading bank for business with strong wealth management and retail capabilities, our tendered colleagues deliver value-added industry expertise to our highly sought after and incredibly loyal customer base, while our conservative approach to credit has historically outperformed our peers. Complementing our commercial loan expertise, our relationship model is exemplified by a strategic product set tailored to meet our customers' needs. Our deposit profile has long been a strength with a focus on commercial operating deposits and a consistent retail base. With efforts underway to expand small business and payments, we expect to further enhance this core funding source. Finally, we remain committed to running an efficient organization and continue to leverage strategic investments to enhance productivity and optimize resources. Strategic diversification of our business is outlined on Slide 4 is intended to optimize returns while minimizing risk. Each business line has distinct characteristics regarding profitability, resources, growth potential and risk, and we closely monitor internal limits to ensure no singular business line becomes outsized. Our MSA focused geographic strategy deploys resources in growth markets, most aligned with our target customer base while balancing regional concentrations. Slide 5 demonstrates our competitive advantage. With the long delivery of sophisticated, comprehensive products and industry expertise by tenured bankers, we feel encapsulate the best features of the largest and smallest companies. We believe our customers do business with us because of the unique value and service we deliver throughout their life cycle helping them achieve their strategic goals. We meet them where they are and we are the right fit for our target customer. Moving to Slide 6. Broad-based loan growth continued in line with our expectations through May. We're the largest contributions from commercial real estate, large corporate and National Dealer Services. As we look to the future, we remain committed to our long-term strategy, and we see opportunity to enhance our focus on our core business and strengthen our competitive position while optimizing our capital and funding. To that end, we have made the difficult strategic decision to exit the mortgage banker finance business. Mortgage Banker Finance has been important for many years. And we have built a strong reputation supporting an incredible customer base. However, the cyclicality and seasonality inherent in this business line creates volatility in capital management. Further, as the industry is navigating funding pressures, we want to prioritize businesses that can enhance our liquidity profile. We believe this strategic action enables better support of our core businesses while also improving the stability of our liquidity. Complementing that decision, we are increasingly -- we are increasingly selectively across our portfolio to prioritize support for customers where the solutions we provide are most valued. This does not reflect a change to our overall strategy, but we will simply be more laser-focused on our target customer base, most aligned with our pricing, market and relationship strategies. We intend for this to be an organic process, but altogether, we expect these optimization efforts to support a mid-80s loan-to-deposit ratio at year-end 2023 enabling a more sustainable funding position. On Slide 7, quarter-to-date through June 7, we have observed more normal customer deposit trends with total deposits being flat in recent weeks. Noninterest-bearing deposit balances have declined as customers continue to utilize funds in their businesses, repay debt or shift excess balances into interest-bearing solutions where possible. We believe these patterns are still driven by Fed monetary policy. It is noteworthy that we have seen more noninterest-bearing deposit stabilization in recent weeks with balances remaining relatively flat since mid-May after adjusting for normal Direct Express month-end patterns. With that, we expect our second quarter net interest income to be at the lower end of the guidance we offered at our first quarter earnings call. We project total year-end deposits to be down modestly from our June 7 balances, reflecting the impact of strategic actions and potential for continued quantitative tightening. Furthermore, we do expect some modest additional shift in our noninterest-bearing mix in the coming months as the FOMC continues to be more hawkish than previously expected. Altogether, we expect this to drive a reduction in our 2023 net interest income compared to our guidance. However, we still expect to be moderately above our record 2022 results. Recall, 95% of our commercial noninterest-bearing deposits at treasury management services and 90% have an ECA, which we feel is a good proxy for operating balances. With that operational nature of our deposit base, very manageable debt maturities and abundant incremental liquidity available, our funding position remains strong. Additionally, considering the impact of the strategic optimization actions I just discussed, we feel our position is even more sustainable going forward. Credit quality on Slide 8 remains excellent. Our first quarter net charge-offs and loan loss reserves were the best of our peer group. While we have signaled an expectation of continued credit migration and a prudently increased monitoring, credit metrics for the first quarter remain historically strong. Overall, credit performance tends to outperform our peers, and we continue to feel well positioned to navigate a potential recession. Noninterest income on Slide 9 remains a compelling story. Consistent with our strategic focus to enhance non-margin revenue, we are pleased with our first quarter growth and strong results through the first 2 months of the quarter. With investments underway in payments, wealth management and capital markets, we see opportunities to enhance our revenue mix over time, creating consistency and even more attractive return profile. Regarding expenses, we remain committed to running an efficient organization and delivering positive operating leverage over time. Our capital position remains strong as shown on Slide 10, with a CET1 of over our 10% target through the first quarter. With projected profitability, more selective loan growth and share repurchases turned off until we have more clarity on the regulatory landscape, we expect to accrete capital above our 10% target through the end of 2023. Further, with a combination of securities repayments, maturities and changes in the forward curve, we anticipate the recapture of AOCI to increase our tangible common equity by over 30% from first quarter 2023 through year-end 2024. While the potential regulatory changes are not yet final, we continue to feel our capital puts us in a position of strength to support our customers. Slide 11 illustrates our proven business model and a relentless customer focus position us for long-term success. Navigation of the first quarter disruption reinforce the strength of our tenured loyal relationships. We provide products and services that entrench us with our customers as they manage their day-to-day operations, whether it's paying vendors, collecting receivables, leveraging working capital, protecting against interest rate risk or more. Our solutions are tailored to meet their needs, and our teams are structured to deliver consistent, reliable service. Complementing our strategy, selective investments already underway should further enhance our overall competitive position. Our proven approach to credit and risk management have positioned us well to navigate a potential recession. We feel we are taking the right actions to lean into our strengths, protect our strong franchise and prepare for a long future as a trusted banking partner to our customers. Thank you, and now we'd be happy to take some questions.

Great. Thank you. Curt, maybe to dig into some of your opening comments. You mentioned you're exiting mortgage banker and increasing your selectivity. You mentioned volatility in capital and liquidity management is reasons for it. So can you dig a little bit more into the rationale for the decision to exit the business? And also, if you can just talk about how it may impact your forward earnings.

I'll let Jim talk a little bit about the forward earnings impact. But as we looked at the portfolio following the events of the first couple of weeks of March as we saw some decline in deposits and sort of we're focused on shoring up liquidity overall, we began to think about our loan portfolio, the portfolios where we thought we had a couple of things. One, they were not as deposit friendly, so they did not generate as much funding and that is the case with Mortgage Banker Finance, even though it's been a very good business for us. Second is just cyclicality in that business. We have quarters where home buying activity is occurring, like in the spring or the second quarter of the year, and then we have quarters where there's very little home buying activity occurring. And then certainly, the refi activity depending upon interest rates creates a lot of cyclicality in that business. So it can really swing sort of loan balances for us and create probably at sometimes the wrong pressure on funding, so to speak. So it's got cyclicality to it. And then third, I would just say from a capital efficiency standpoint, we thought about that as well. And then just integration to the rest of our bank. It's a business line that is a little isolated from the rest of our organization. We don't have quite as much cross-sell into our retail bank. or wealth management or some of the other capabilities that we deliver. So all that factored in to making that decision. It's been a good business for us. We'll work to transition those clients over time. We are not selling the business. There'll be an organic sort of wind down as we have maturities occurring in the portfolio.

Yes. And I look at it more in terms of capital efficiency. It was a business that operated in the black. We don't publish the exact net income for our various business lines. But it did make money. Obviously, that would be lost net income. But we do think that once we start buying back shares again, it will be accretive to the bottom line to the tune of a few cents. And while that might not sound real dramatic, this was, as Curt kind of implied in his opening comments, really not made just for pennies per share, but more just management focus, cross-sell where we place our liquidity, where we place our capital. But ultimately, we do think it will be accretive to ROE and EPS once we can buy back the shares associated with that capital.

And in terms of loan growth, will that impact loan growth a little bit? Or is that just repurposing capital into other areas of lending?

It will certainly affect loan growth.

Okay. So to the tune of...

Well, you saw the -- we previously guided 8% to 9% full year over full year. We took that down to 8%. A number of puts and takes there, but certainly, mortgage bankers' exit was a big part of that. Now Mortgage Banker, it will be more in the fourth quarter that you see those balances come down. So I won't say it was a huge impact to the average loan growth, but it is one of the drivers in terms of bringing our guidance down.

All right. Perfect. Curt, I did want to dig in on a broader strategy question. The environment has clearly changed quite a bit. Are there any changes you're considering to meeting long-term strategy to sort of protect and grow your returns in this environment?

Well, thank you. I would say, overall, no changes to our strategy. We are primarily a commercial bank with a really strong wealth and retail presence in great markets where we operate, we really like all the business lines that we're in, with a lot of long tenured bankers, a lot of long tenured relationships. And that model has worked very well for us. And I think it's really differentiated us versus some of our regional peers, both larger and smaller than our institution. We're continuing to lean into fee income, and we've got a number of things in the works right now in the payments area, treasury management, continue to enhance our wealth management capabilities, capital markets we've added recently, some M&A advisory capabilities. And we've been expanding into some new markets. We've got a new presence in the Southeast and the Carolinas. They've added some folks in the Denver, Colorado market recently, in middle market banking. All of those, we think, are the right things for long-term growth. At the same time, we are being a little bit more cautious on the balance sheet on the lending side, taking care of our customers. We're probably not quite as aggressive on new opportunities right now until we sort of see how the funding environment settles out. And then lastly, I would say, we've proven over time that we manage expenses very well as a company. We produced record results last year and have had a very good efficiency ratio. But as this environment unfolds, we will continue to focus on efficiency, looking at real estate, technology, other things that we can do to be careful on the expense front and produce operating leverage for our company over the long term.

Right. So there's a lot there, and I'm sure we can unpack it over the course of the next 20 minutes. But Peter, I want to bring you in. Can you just share some thoughts on how customer behavior has changed since March 8, since the end of the quarter? What are you seeing? You mentioned that there's been more mix shift from NIB to IB. So can you just talk about what you're hearing from customers and what your messaging to them has been?

Yes. I think the first few weeks of what happened earlier in March subsided pretty quickly, I think, once we got kind of into the end of April and conversations with customers at this point have been less about asking questions about Comerica. I mean, for the most part, those conversations all been really, really positive. It's more questions about what are we doing to help them manage their liquidity, give them visibility, give them control, what kind of products and services are we providing options, syndicated deposit products and so forth. And so that's -- we had started the investments on our digital commercial journey, if you will, a couple of years ago, and I think those have paid off really well the last 90 days, 60 days, and we're going to continue that journey, continue to make investments and what we provide. We believe we can be a leader in the payment space to the middle market sized companies, commercial space. We absolutely feel like that's a place that we can lean in heavily. So the conversations have really moved to that, more than any questions about what's going on in the banking world and so forth. I think it stabilized a lot the last month.

And then, Jim, as you think about the mix of NIB to IB, you had about a $3.5 billion outflow in NIB, $3.4 billion inflow into IB. How do you think about that mix as we go through the next couple of quarters?

Yes, we did end up on a spot basis at about 46% in terms of noninterest-bearing to total deposits and that was really implied by the numbers you just gave us, Manan. It's really a combination of both noninterest-bearing departing, but also some success in bringing on interest-bearing deposits. So we feel good about that. In terms of where that 46% might go, we do think it will go down just a little bit more. A couple of reasons for that. One, the Fed has not done hiking. We probably have at least one hike left at this point and corporate treasurers are willing to throw that needle just a little bit tighter, it seems like with every hike that we get. And we're also having tremendous success, as Peter was saying on with some of our products, including our FDIC network products. So we expect to be successful in bringing some deposits back. Of course, that would flow into interest-bearing deposits and dilute the percentage a little bit. But I'd like to remind people, there's a numerator and a denominator to that equation, and we certainly welcome back those deposits. So -- and we probably have a couple of percent more to go, I would say, but we're a long ways along that route, and we should see some stabilization at that point.

So one of the benchmarks that a lot of investors have been looking at is what NIB to total deposits has been not just in 2019, but maybe back before the GFC. Comerica, I think, was somewhere around 27%, so a lot lower than where you are today. Is that an appropriate level to think about? Or has the company changed and has the environment changed a lot since then?

Yes. Well, we've obviously dipped below the prepandemic levels of just under 50%, and that makes sense. Rates are more than double what they were prepandemic. So I understand the next data point people like to go to is maybe the great financial crisis or maybe right before then. But clearly, so much has changed with Comerica and the whole industry since then. In the case of Comerica, whether you measure it by deposit mix or business revenue, we are more commercially oriented than we used to be and commercially oriented banks tend to have stronger ratios in that regard. So certainly one change. A lot of development done on the treasury management product suite, which should make more deposits operational. So I consider that a pretty big change. Something that's gotten a little bit of press lately, the government card that we feel good about added, on average, it's about $3 billion of commercial deposits that are noninterest-bearing. So that's something that was very different than prepandemic. And then it's interesting when you look at prepandemic and what was going on in the industry, including Comerica, I mean we think there is some liquidity stress now in the industry. It was really high back then. I don't know that we recognized it at the time and until great financial crisis, but you had banks like Comerica running north of 130% loan-to-deposit ratio. And that really explains why the betas were even higher back then and banks were paying very high rates to bring deposits onto the balance sheet. And you had some deposits flipped from noninterest-bearing to interest-bearing back then. So I just think the liquidity stress that we had pre-financial crisis contributed to those low ratios. So a lot is different, both within the industry and Comerica and for those reasons, I don't see us approaching anything like that going forward.

All right, perfect. So -- and just to confirm what the recent mix shift -- or what impact the reason mix shift has on your guide, if I got that correct, your deposit guide is still intact. It's just a mix shift between NIB and IB. The NII guide somewhere at the lower end of your down 11% to 13% Q-on-Q range for the quarter. And then for the full year, it's modestly above year-on-year. Is that correct?

That's right. Yes. Certainly, probably at the low end of that range we gave for the second quarter. And then full year, yes, materially below the previous guidance just due to the mix shift and we do expect to be above that record level that we had in 2022, but just moderately above that, I would say.

And how does that factor into your assumptions on the deposit beta guide? I think you were conservative in your guide in the first quarter saying deposit betas would go up to about 50%. So how does that impact those numbers?

Yes. Mix shift is one driving factor for the outlook change. The other is deposit betas that would probably be the second biggest factor. We had guided approaching 50%, I think, at the earnings call. Through the month of May, we were at just high 40s, I would say. So just about to approach 50%. Our forecast now has us in the mid-50s and so that would be a contributing factor to the outlook change. And that's a function of not just competitive pressures, but I think in some cases, success with our FDIC network product. I mean, we're happy, again, to bring these deposits back. We feel like we're having success with interest-bearing deposits, and that is something that will put some stress on the beta, but we do welcome the deposits and the funding and the liquidity it provides.

And that's all embedded in the full year guide?

Yes.

All right. Perfect. Peter, maybe give us a sense of what corporates is saying, are they putting a greater emphasis on diversifying their deposit balances over different banks? Or what are you hearing from them?

I think that initially, that was a big part of the conversation. And I think that when you look at our deposit base, I mean, we've got a great retail franchise, we've got a great wealth business, and we have a really good kind of middle-market business banking business as well. All are great deposit generating businesses. So when you start talking about diversification, I think you talked mostly about the larger corporate businesses where their boards, their fiduciary responsibilities of making sure they're diversifying their deposits might be a bigger issue than a small business or a middle market customer who is mostly just concerned about are they making sure they cover payroll and take care of those things. So I think the diversification conversation will be an ongoing one candidly and banking from now on for all of us, for all banks at consumer, commercial, large corporate levels, but it's it certainly has died down as being something that the bigger corporates. I feel like we've kind of handled that. And so all of us, if you had $250,000 at a bank, you wanted to be sure you understood what the insurance was at your bank and so forth. And we've handled all those conversations in our retail bank, our wealth bank and the commercial bank. So I think a lot of the diversification conversation has been at the much, much bigger dollars, publicly traded companies and so forth that have to be a little bit more required to diversify.

Curt, I wanted to get your thoughts on the recent headlines on the Direct Express business. How should we be thinking about that business for Comerica? And many were modeling your business on the assumption that you would lose some of those deposits. So can you talk about that deposit franchise in general?

Yes. Many of you probably saw the article in the American Banker on Direct Express. Took us a little bit by surprise, quite frankly, because they were not consultative with us on that in advance. And what I would say is a lot of what was quoted in the article is really old information. Most of the issues that were brought up are issues that we have resolved already working with the physical service, with the treasury, with our third-party service provider and our institution to bring closure to those items. And we feel really good about the platform and what we deliver every day. We've been in that business now for 15 years. We -- in addition to the treasury platform, we have other state programs that we manage as well and kind of our government banking area of the company. Remember, sort of the population we're serving there, there's a lot of individuals who are under banked. There is some complexity in how you deliver those services to what is about 5 -- a little under 5 billion customers overall, their recipients of any type of government program, social security, disability payments, et cetera, veteran payments. And so we feel really good about sort of how we deliver that day in a day. We've been very proud of that platform. And I think the government has been pleased with the service that we provide. Our contract goes through early 2025. We've gone through now several renewals of that contract. Even if we were not successful in rebidding on the contract or for some reason, we chose not to rebid on it. There's a tail, we believe, in the transition. It's not easy to transition that many clients with a platform like that. And so you should think about that being a several-year process, is what we've discussed before with the treasury. Because it would literally involve rebadging so to speak, sending new cards to every one of those customers. So the transition would take quite a while. And so if you're worried about that maybe going away in the short term, if we were not in the program, that would really be more a multiyear type scenario, possibly 3, 4, 5 years out. And we would look for other ways to sort of replace that funding. But again, we feel really good about the platform. We thought that was an unfortunate article. You may have seen that I fairly quickly read a rebuttal to that, just reemphasizing our commitment and sort of pride in how we deliver sort of day in and day out.

And this was a question that came in yesterday, so I just want to get your thoughts on that. In the slide deck, you have a $600 million Q-on-Q decline in Direct Express deposits. I just wanted to confirm that, that has nothing to do with the concerns mentioned in the article.

That is correct.

All right. Perfect.

You probably -- those that have met with us before, some of these questions have come up around how that program works. But it funds at the beginning of the month. So the first -- sort of first half of the month, we have higher balances, it goes down, never goes to zero and then kind of comes back up at the end of the month. So there is -- when we say $3 billion, we're talking more about average balances because intra month, there is some volatility that occurs.

All right. Perfect. I want to shift over to regulation. It looks like we're going to get some type of regulation increase for banks of sub-$250 billion. Curt, how does that -- what are you hearing from regulators? And what do you think is most likely on the regulatory front? And then as you think about Comerica's size, pretty close to $100 billion in assets, would you think you will try to manage the business to stay below the $100 billion level?

Well, probably the same that all of you are hearing and I participate in the Bank Policy Institute with top 25 banks or so. We've been in front of regulators and on Capitol Hill, et cetera, in the last couple of weeks as we have met together and I think a lot of the focus right now is around $100 billion to $250 billion banks, and we're slightly below that level. I'm not naive, even if we're not above $100 billion, I still think regulatory pressure will be tighter. But I think in terms of any actual congressional action or a more formal change, it will be focused more on the $100 billion to $250 billion level. Heading into this crisis, we were a $91 billion bank with a little bit of balance sheet being a little bit more selective, we'll probably be a little bit slightly smaller than that on a go-forward basis. So we're comfortably below the $100 billion mark. We are prepared if we go over the $100 billion mark to kind of deal with that from a regulatory standpoint, they've been working on that for a while, just knowing that we were kind of getting close to that number. I can't tell you sort of how that plays out. I think, organically, it would take a while to get over the $100 billion mark. I don't believe that the right thing for our shareholders is to limit our growth as a company. And so I don't want a sort of regulatory pressures to be the reason that we would not grow beyond $100 billion. And nothing really has changed for us on the M&A front. We continue to focus on running our playbook on organic growth. We'll continue to expand into new markets and having a lot of success there. Having said that, I think consolidation is going to probably heat back up in the industry, it seems like the regulators are kind of indicating maybe they would let that happen. We've been on that trend for a long time, right, 4,000-ish banks today, and I don't know where that number gets to longer term. And certainly, if the right thing came along, cultural fit, strategic fit, good funding source, we would always take a look at it, but it's not sort of the primary thing that we're focused on as an institution.

So Jim, what does that mean for capital return in general? You're now focused on growing your CET1 above the 10% target. You've paused buybacks, which is in line with what we've heard from other banks. So how are we thinking about capital return in this environment?

Yes. We obviously have a very strong dividend that we're proud of and feel very confident in supporting going forward. Incredible yield, obviously, right now. In terms of share buyback, we are sitting on the sidelines. We don't have a timetable for returning. And I'll just kind of adjunct on to Curt's comments. We don't know where the regulatory regime is going, whether it be formal or informal in terms of how a bank of Comerica size is regulated, and we want to make sure that we're in good stead with the regulators and well positioned. So for now, we're going to let capital accrete, and CET1 is obviously in a very strong position for Comerica and with strong earnings this year. It will continue to go up. And as we perhaps get more selective on loan growth, that will drive that much further up in terms of capital ratios. So we think towards the end of the year, we're going to be in a really strong position in a number of capital measurements, and we'll have a number of options there, whether that's turning on the share buyback again or whatever else we might do with that capital. But we think we're going to be in a very strong position. I always like to have more capital than less in the short term when there's this type of uncertainty with the economy as well as the regulatory environment. So I feel like that's a real positive story and gives us some great optionality.

Right. Great. I do want to go to the audience in a moment, but a quick question on just the expenses and fees for the quarter. I think you noted in the slide deck that you're seeing strong performance on fees and then on the flip side, you noted some legal end FDIC costs are weighing on expenses. So can you talk about what that means for your 2Q guide in general?

Yes, we didn't publish a formal update to that guidance. But the comments would lead you to think that we're coming in a little stronger in noninterest income than we might have expected, perhaps a little more pressure on expenses as noted in the slide deck. So the two of those will roughly offset each other, is how I tend to look at it. So I don't think there's a big story there and certainly very proud of the strong noninterest income. That's been an ongoing success story for us for a couple of years now, and it feels like each quarter, it keeps getting stronger. And we're big fans at Comerica of noncapital consuming noninterest income. As Curt mentioned, we continue to invest in treasury, in wealth management, capital markets, that's where we're going to continue to see a disproportionate amount of our investment goes. So big fans of noninterest income, and it continues to be a real great story.

All right. Perfect. Are there any quick questions in the room? All right. Maybe just to touch on loans. Peter, the average loan growth guide is for about up 8% year-on-year. Can you talk a little bit about the different lines of business, we went through Mortgage Banker, but can you talk about the other lines of business now that's impacting the loan growth?

Yes. So we still are seeing growth in our commercial real estate business, a lot of which are deals that got on a year ago that are funding up. It's mostly a construction business. We have started to see some use of a dealer floor plan as well. So those are 2 businesses that are kind of growing on their own. We continue to have really good success in our Environmental Services business, which would be sort of our trash business, recycling and our renewables growth. We've had great, great success there. And then I think just general middle market across the board has been good. Wealth Management, private banking loan portfolio has grown nicely. So those are kind of the real positives. I think we'll continue to see challenges as we talked about in our equity fund services business. I think in our large corporate business, I think that we'll probably see a little bit of headwinds in both of those businesses. But overall, the middle market space, I think, continues to look really good.

And then how do you think about credit quality in general, CRE, there have been a lot of concerns there? Are you putting in any contingency plans as the environment gets safer either to bring in more equity or work with your borrowers in these loans?

Well, credit quality in general has been outstanding for the bank. And so far, we've seen a little bit of creep in what you might call our leverage businesses. But overall, credit quality continues to be great. Our CRE portfolio is outstanding. I think in the deck, we showed a little more information about our industrial and real estate portfolio, our real estate portfolio outside of our commercial real estate business. Our office exposure is really small. It's less than 2%. And to the extent that it's in commercial real estate, it's with developers we worked with a long, long time. The rest of it, a lot of it's in private banking, and you've got guarantors with lots of liquidity. And so I don't know that we need to be proactive on asking for equity. We're not seeing the need for that at all, but we feel really good about the portfolio that we have and the history that we've shown on being able to perform through a tough recessionary environment, I feel like we'll be able to do again.

Great. And then, Curt, maybe to wrap up with all the noise that we've had since March for the regional bank space overall, what do you think investors are missing about the Comerica story?

Well, I mean, a couple of things I'd say there is -- I've said this a number of times at some investor meetings I've had, is we're pretty much the same bank we were before all this happened, right? And if you look at 2022, a record performance for our company by any measure. ROE, ROA, top line revenue, overall profitability as a company, we were off to a really great first quarter. We talked about a lot of positive trends we're continuing to see in terms of loan demand and credit, credit quality, fee income, et cetera. And so nothing's changed in that story except for the disruption that we saw across the whole industry related to deposit and funding concerns. And so what we're trying to do is adjust a little bit to that and make sure our funding is secure, our capital is strong, that we might moderate a little bit in some of our lending businesses and do a little bit of rationalization, but not change our model and our focus overall. We're in great markets, long tenured bankers, great capabilities across the company. We'll be smart about expenses and efficiency, but we're really investing for growth and focus on growing the organization overall and returning appropriate returns to our shareholders. So I don't think anything has changed to the story overall. I think we've performed well and have responded to really what was a curveball for the entire industry.

All right. Perfect. With that, we're out of time. Curt, Jim, Peter, thanks so much for joining us.

Thank you, Manan.

Thank you.