Comerica Inc. is keenly aware of its size as the potential for increased regulation looms over banks with between $100 billion and $250 billion in assets.
Following the failures of three regional banks, regulators are expected to place heightened capital, liquidity and stress-testing rules on banks with between $100 billion and $250 billion in assets. Comerica is just shy of that threshold with $91.13 billion in assets as of March 31, according to S&P Global Market Intelligence data.
Though any potential rulemaking is expected to explicitly target banks above $100 billion in assets, Comerica will likely still feel the repercussions even as it sits "comfortably below" that, Chairman, President and CEO Curtis Farmer said June 13 at an industry conference.
"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 naïve, even if we're not above $100 billion, I still think regulatory pressure will be tighter," Farmer said.
Still, the company is thinking carefully about approaching $100 billion in assets, and could shrink some in the near term.
"We'll probably be a little bit slightly smaller than that on a go-forward basis," Farmer said. However, "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 sort of regulatory pressures to be the reason that we would not grow beyond $100 billion," he added.
If the company does grow above that threshold to become formally subject to whatever new rules lie ahead, it is prepared to "deal with that from a regulatory standpoint," Farmer said.
But growing above $100 billion in assets would "take awhile" organically, the CEO said. Generally, banks like to jump over key asset thresholds with a deal to offset the costs associated with additional regulation.
The recent turmoil is likely to lead to a wave of consolidation that could present opportunities, Farmer said.
"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," he said. "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."
As the company waits for more clarity on the regulatory environment moving forward, it has paused share repurchases to support a Common Equity Tier 1 ratio above 10%. Comerica's CET1 ratio was 10.09% at March 31.
"We are sitting on the sidelines. We don't have a timetable for returning," CFO James Herzog said. "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."