DBRS Confirms Comerica Inc. at A; Comerica Bank at A (high); Trend Remains Stable

Dominion Bond Rating Service (DBRS) has today confirmed the ratings and Stable trend of Comerica Incorporated (CMA or the Company) and its principal operating bank subsidiary, Comerica Bank, as indicated in the table below. The rating action followed a review by DBRS of CMA’s operating performance and financial fundamentals.

Over the past year, CMA has produced both relatively stable earnings and good profitability, while further improving its asset quality. Net interest income remained relatively unchanged over this period, in spite of a solid 10% average loan growth due to higher funding costs and competitive loan pricing pressure. Fees and commissions also remained unchanged (net of nonrecurring events), both in nominal terms and at about 30% of net revenues. The positive loan growth momentum, particularly in CMA’s Texas and western operating areas, and the stabilizing interest rate environment will likely translate into modest earnings growth and higher profitability in the near term.

Nonperforming assets (NPAs), including delinquencies in excess of 90 days as a percentage of loans, were lower at September 30, 2006, than a year earlier; although, NPA levels started to increase slightly over the past three consecutive quarters. Net charge-offs (NCOs), however, declined substantially and amounted to a low 0.11% of loans for the first three quarters of 2006. Capitalization, liquidity and holding company fundamentals all remained stable. These characteristics, along with continued good prospects for maintaining sound operating fundamentals, accounted for the confirmation of CMA’s ratings and Stable trend.

The ratings of CMA are supported by continued strong market position in providing banking and other financial services to a predominantly middle market customer base, a sound financial risk profile and improved asset quality. The ratings also consider the Company’s successful expansion into higher-growth markets of California and Texas, while maintaining a dominant presence in its Michigan home market.

The Company’s strong financial risk profile, including a satisfactory funding mix, is the result of a conservative risk management culture. Wholesale funding reliance is not excessive at this time, and is in line with that of its peers. However, the continued robust loan growth originated by the Company is not matched by commensurate core deposit growth, which could lead to higher funding costs and heavier dependence on wholesale funding.

Asset quality has continued to improve over the last few years. CMA’s initiatives to strengthen its credit underwriting and monitoring process, and its exit from cyclical and non-core relationships, contributed to the improvement in credit quality. The loan portfolio is sufficiently granular and lacks any material industry concentrations. Exposure to the automotive sector has been intentionally reduced and is currently at manageable levels.

DBRS sees the continued expansion into higher growth markets, increasing fee income contribution and boosting core deposit growth as important challenges in the intermediate future for the Company.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The Trust Preferred Securities contain certain unique covenants that give them some equity-like characteristics.