Comerica Announces Implementation Of Its Efficiency And Revenue Initiative

(RTTNews) - Comerica Inc. (CMA) announced the implementation of its efficiency and revenue initiative or "GEAR Up", which is expected to drive additional annual pre-tax income of approximately $230 million by year-end 2018 from the actions identified to-date.

"Based on our initial extensive review, we are announcing the actions we are taking through Gear Up that are expected to deliver additional annual pre-tax income of approximately $230 million by year-end 2018. This initiative fundamentally transforms the way we operate to drive further efficiency and revenue growth. We are confident the initiative will improve profitability, despite current market conditions and a tough banking environment," said Ralph W. Babb, Jr., chairman and chief executive officer.

The company expects its efficiency ratio to improve, declining to the low 60 percent range by the end of 2017, and at or below 60 percent by year-end 2018, without any increase in interest rates.

The initial GEAR Up initiative includes approximately $140 million in pre-tax benefits expected to be achieved by fiscal year-end 2017 and an anticipated annual run-rate benefit of approximately $230 million by year-end 2018.

Revenue enhancements are expected to be approximately $30 million by year-end 2017, which increase to approximately $70 million by year-end 2018, through expanded product offerings, enhanced sales tools and training, re-aligned employee incentives and enhanced customer analytics to drive opportunities.

Expense reductions are targeted to be approximately $110 million, which increases to approximately $160 million by year-end 2018. This is to be achieved through an approximately 9 percent reduction in workforce, streamlining operational processes, real estate optimization including consolidating about 40 banking centers, selective outsourcing of technology functions and reduction of technology system applications.

Pre-tax restructuring charges of $140 million to $160 million in total are expected to be incurred through 2018.

Looking ahead for 2016, the company expects Average loans to be modestly higher, in line with Gross Domestic Product growth, reflecting a continued decline in Energy more than offset by increases in most other lines of business; Net interest income to be higher, primarily reflecting the benefits from the December 2015 short-term rate increase, loan growth and a larger securities portfolio.