Comerica Faces Pressure to Sell from Activist Investor HoldCo Asset Management

Activist investor HoldCo Asset Management is pressuring Comerica to sell to a larger bank, citing "disastrous decisions" and "objectively poor performance." The investor owns 1.8% of Comerica stock and has accused the bank of making poor decisions, including not renewing its Direct Express card program and making "poor decisions" within its swap portfolio. Comerica CEO Curtis Farmer has been under fire for his response to analyst questions during the bank's Q2 earnings call. HoldCo believes that a larger bank could buy Comerica without major capital issues and has suggested PNC, Fifth Third Bank, and Huntington Bancshares as options.

Title: Activist Investor HoldCo Pressures Comerica to Sell to Larger Bank

Dallas, Texas-based Comerica Inc. is facing pressure from activist investor HoldCo Asset Management to sell itself to a larger bank, citing what it describes as "disastrous decisions" and "objectively poor performance." HoldCo, which owns approximately 1.8% of Comerica's stock, has released a presentation detailing its concerns and urging the bank to initiate an immediate sale process [1].

The investment firm, based in Fort Lauderdale, Florida, has highlighted several issues with Comerica's operations. One significant concern is the bank's decision not to renew its Direct Express card program, which had $3 billion in non-interest-bearing deposits at a time when deposits were critical. Additionally, HoldCo has pointed to poor decisions within Comerica's swap portfolio, leading to losses and preventing the bank from realizing the full benefits of higher rates on its floating rate loan portfolio [1].

HoldCo's appeal was sparked by Comerica CEO Curtis Farmer's response to analyst questions during the bank's July 18 second-quarter earnings call. Farmer acknowledged that the bank's stock price had not improved significantly since he took the helm in 2019, noting that the stock price had only risen from $61 to $62 in 25 years. He also stated that he could not speak to the 10-year prior period of time [1].

In its presentation, HoldCo suggested that a larger bank could buy Comerica without major capital issues. The firm identified PNC Financial Services Group, Fifth Third Bancorp, and Huntington Bancshares as potential buyers, citing substantial market overlaps and operations in contiguous markets [1]. HoldCo believes that these acquisitions could result in significant premiums for Comerica shareholders, as well as three-year earn-back targets and strong capital levels.

In response to HoldCo's presentation, Comerica stated that it is focused on driving value for shareholders and continuing to execute its strategic plan to achieve that objective. The bank's board and management team have a strong track record of making strategic improvements to create long-term value and are confident in the future of their business [2].

HoldCo's analysis comes a week and a half after Farmer faced questions from analysts about how the management team and the board plan to improve the bank's performance. Analysts have noted that Comerica's stock price has risen only 2% over the past 25 years, while the KBW Nasdaq Bank Index, which tracks the performance of the 24 largest U.S. banks, has increased by 57% [2].

HoldCo is not the only bank that the investment firm has its eye on. According to its presentation, HoldCo owns approximately $793 million in bank stocks, with most held in eight core banks, including Comerica, Capitol Federal Financial, Central Pacific Financial, Citizens, Columbia Banking Systems, Eastern Bankshares, First Interstate BancSystem, and KeyBank. Each of these banks should be on watch, the presentation indicated [1].

Whether Comerica sells or not, analysts are forecasting a meaningful uptick in mergers and acquisitions among banks of all sizes. This is despite the negative market reaction to the proposed merger of equals between Pinnacle Financial Partners and Synovus Financial [2].

References
[1] https://www.bankingdive.com/news/activist-investor-pressures-comerica-to-sell/756176/
[2] https://www.americanbanker.com/news/comerica-faces-pressure-from-activist-investor-to-sell