Comerica Inc. is exiting its mortgage banker finance business as it pivots its focus to business lines that bolster liquidity.

Speaking at an industry conference on June 13, Comerica Chairman, President and CEO Curtis Farmer announced that the Dallas-based company is winding down its mortgage banker finance business line as it sees more cons than pros associated with keeping it.

The exit will allow the company to reduce funding pressures at a time when deposit competition in intensifying and funding costs are coming under stress. Specifically, the mortgage banker finance business is not "deposit friendly," Farmer said. With the exit, Comerica can better "prioritize businesses that can enhance our liquidity profile," Farmer said. "We're focused on shoring up liquidity overall."

Furthermore, the mortgage banker finance business is isolated from the rest of Comerica, making it difficult to cross-sell retail bank products to customers from that business line, Farmer said.

The exit will also help the company avoid volatility in capital management that comes with the cyclicality and seasonality of the business line, Farmer said.

"The cyclicality and seasonality inherent in this business line creates volatility in capital management," he said. "We have quarters where there's very little home buying activity occurring ... so it can really swing sort of loan balances for us and create probably at sometimes the wrong pressure on funding, so to speak."

Comerica plans to eventually buy back stock with the additional capital from closing the business, which will boost its earnings per share and return on equity, CFO James Herzog said during the conference.

"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," he said.

The company also expects the effort to support a loan-to-deposit ratio in the mid-80s at year-end "enabling a more sustainable funding position," Farmer said. Comerica reported a loan-to-deposit ratio of 84.9% at March 31.

While the exit will improve some performance metrics, it will weigh on the company's forward loan growth, which contributed to the decision to lower its full-year loan growth guidance, the CFO said.

"We previously guided 8% to 9% 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," Herzog said. "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."

Comerica opted to wind down the business instead of sell it. It expects to complete the process by year-end.

Winding down, rather than selling the mortgage banker finance, will allow Comerica to exit the business at full value "rather than what might happen in the wild card of a sale," Piper Sandler analyst Scott Siefers wrote in a note.