Comerica, headquartered in Texas, announced on Friday that it expects a decline in its net interest income (NII) for the current quarter, reflecting challenges faced by banks in retaining depositors amidst persistently high interest rates. The U.S. Federal Reserve’s commitment to a “higher-for-longer” interest rate environment has prompted customers to seek out high-yield alternatives such as money market funds, diverting funds from traditional bank deposits.
The projection by Comerica indicates a 5 to 6 percent reduction in net interest income for the fourth quarter. In the third quarter, the bank witnessed a notable dip in NII, with a decrease of $106 million, settling at $601 million compared to the previous year. Concurrently, the net interest margin contracted from 3.51 percent to 2.84 percent during the same period.
Despite these headwinds, Comerica managed to outperform per-share profit expectations. Non-interest income experienced a commendable uptick of 6 percent, reaching $295 million compared to the corresponding period last year. According to data from the London Stock Exchange Group (LSEG), the bank reported a profit of $1.84 per share for the quarter concluding on September 30, surpassing analyst projections of $1.69 per share.
Comerica also witnessed a favorable uptick in average deposits, with a 2.4 percent increase, culminating in $65.88 billion for the quarter. This development indicates a notable rise in customers’ confidence in regional banks, particularly since a sector-wide crisis in March led many to shift their funds towards larger financial institutions.
In a parallel development, Fifth Third Bancorp and Regions Financial have also foreseen a decrease in their fourth-quarter NII, indicating a broader trend within the banking sector.
Comerica’s strategic response to the shifting financial landscape remains to be seen, as the institution navigates the challenging terrain of high interest rates and evolving customer preferences. The bank’s ability to adapt to this dynamic environment will undoubtedly be closely monitored by industry analysts and stakeholders alike.