Shareholders Protest at Comerica Annual Meeting
April 26 2016 - 04:20PM
Dow Jones News
Several Comerica Inc. shareholders voiced their dissatisfaction
with the bank's recent performance in an unusual show of dissent at
the lender's annual meeting Tuesday. But the protest only went so
far and all of the bank's governance proposals passed by a wide
margin.
Comerica shareholders overwhelmingly voted in favor of the
bank's directors and compensation policies, with each of the three
measures on the subject getting more than 80% support.
But large shareholders told the bank it has failed to earn
acceptable returns for too long and would be better off part of a
larger bank that can cut costs, echoing concerns some of them
voiced in a Wall Street Journal article last week.
About a dozen shareholders spoke at the meeting, including a few
that praised Comerica's results. Most, however, said they want the
company to quickly start improving returns.
Jack Barnes of Samlyn Capital LLC, for instance, asked the bank
for a "reasonable" timeline for improved results, saying that he
questioned whether the company was going in the right direction and
thinks it may need to explore a sale. The firm owns a 1.2% stake in
the bank.
"There's only so many ways I can say this: There is a sense of
urgency," Comerica director Rick Lindner said in response.
Comerica shares were up 3% to $44.98 and are now up 19% this
month.
Bank representatives said that the bank's recent struggles are
due to the fact that it has been caught square in the middle of
changing dynamics in the banking world. The bank has been hard hit
by years of low interest rates and deteriorating energy loans, as
well as growing regulatory costs from postcrisis laws.
At the same time, the bank's representatives indicated they
don't want to use those headwinds as an excuse and on Tuesday said
they plan to reach a double-digit return on equity. Comerica last
week said that it has hired Boston Consulting Group to help improve
results. As part of that process, Comerica will "put everything on
the table," the bank has said.
Bank analyst Mike Mayo of CLSA is spearheading an effort by
several large shareholders to persuade Comerica Inc. to explore a
sale, the Journal reported last week.
"This is a turning point for management," Mr. Mayo said after
the Tuesday event.
The bank also is facing heat from Hudson Executive Capital LP,
an activist fund started last year by former J.P. Morgan Chase
& Co. deal makers Douglas Braunstein and James Woolery. The
fund, which owns a 0.8% stake and prefers to operate behind the
scenes rather than publicly confront management, believes the bank
needs to be proactive on selling itself, according to a person
familiar with the matter.
Comerica, with $69 billion in assets, is primarily a lender to
businesses. It is one of the smallest banks labeled "systemically
important" and subject to the Federal Reserve's stress tests,
meaning it has to spread the regulatory costs across a smaller
asset base than other lenders.
Comerica is positioned to benefit when rates rise, but has been
hurt as the Fed has kept rates near zero. The bank's relatively
large energy exposure has proven to be a major drag on profits.
Last week it said that 56% of its energy loans were criticized, or
at greater risk of default. It also set aside more money for energy
loans that could go bad, which led it to miss earnings
expectations.
Some smaller shareholders also stood up and said that while they
understand the concerns addressed by larger shareholders they urge
the company to not lose its feel as a bank that cares about the
communities where they operate, and provides important face-to-face
service.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Dan
Molinski at Dan.Molinski@wsj.com
(END) Dow Jones Newswires
April 26, 2016 16:05 ET (20:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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