Comerica Incorporated (NYSE:CMA) Q3 2016 Earnings Conference Call - Final Transcript

Oct 18, 2016 • 08:00 am ET


Comerica Incorporated (NYSE:CMA) Q3 2016 Earnings Conference Call - Final Transcript


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Good morning. My name is Regina, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Comerica's Third Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I would now like to turn the conference over to Darlene Persons, Director of Investor Relations. Ms. Persons, you may begin.

Darlene Persons

Thank you, Regina. Good morning and welcome to Comerica's third quarter 2016 earnings conference call. Participating on this call will be our Chairman, Ralph Babb; President, Curt Farmer; Chief Financial Officer, Dave Duprey; and Chief Credit Officer, Pete Guilfoile.

Through this presentation, we will be referring to slides, which provide additional details. The presentation slides as well as our press release are available on the SEC's website as well as in the Investor Relations section of our website

Before we get started, I would like to remind you that this conference call contains forward-looking statements and 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.

I refer you to Safe Harbor Statement contained in the release issued today as well as Slide 2 of this presentation, which are incorporated into this call, as well as our filings with the SEC for further factors that can cause actual results to differ. Also, this conference call will reference non-GAAP measures, and in that regard, I would direct you to the reconciliation of these measures within this presentation.

Now, I'll turn the call over to Ralph, who will begin on Slide 3.

Ralph Babb

Good morning and thank you for joining our call today. Before we discuss our third quarter results, I would like to give you an update on our expense and revenue initiative, which we call GEAR Up.

As we announced on our last earnings call, we've identified more than 20 work streams that are expected to drive a significant improvement in our bottom line. At that time, we also indicated that there was more to come as we were still identifying and analyzing other opportunities.

We've now determined that those new opportunities add about $40 million in savings due to our initial 2018 target. We now estimate that the GEAR Up initiative will drive additional pretax income of $180 million in 2017 and $270 million in 2018.

Our total restructuring charge estimate remains unchanged at $140 million to $160 million. Without any increase in rates, we believe the actions we are taking will improve our efficiency ratio to the low 60%s by the end of 2017 and at or below 60% by year-end 2018.

The walk-forward at the bottom of the slide illustrates how we expect to achieve our goal of a double-digit ROE in 2018. By adding our 200 basis