Comerica Should Sell Itself or Get New CEO, CLSA’s Mayo Saysby
Shareholders may consider voting CEO out, according to analyst
Bank is a test case to see if industry has reformed, Mayo says
Comerica Inc. should either find a buyer or look for a new chief executive officer, according to Mike Mayo, an analyst at CLSA Ltd.
“What we’re calling for at Comerica is greater accountability,” Mayo said Wednesday in an interview with Tom Keene on Bloomberg Television. “If Comerica doesn’t sell, they should get a new CEO.”
CEO Ralph Babb pledged in April to improve returns and said he’d even consider offers to sell the Dallas-based bank after it got stung financing shale drillers. Comerica’s business model needs to be examined and refined, he told investors at the firm’s annual meeting, adding, “we must earn our right to remain independent every day.”
“Under the 14 years of the CEO, he’s been paid $91 million and the stock’s down one-fifth,” Mayo said. “Why are you in your job for over 10 years if your stock’s down one-fifth?”
Comerica said in April that it hired Boston Consulting Group Inc. to review its expense and revenue base after energy market volatility hurt results. At the firm’s annual meeting that same month, Babb deflected a reporter’s question about succession and whether he was considering retirement.
The company’s stock has improved 12 percent this year to $46.80. Comerica slumped 11 percent in 2015 and 1.5 percent a year earlier, after surging 57 percent in 2013.
“Comerica remains focused on executing its transformational enterprise-wide initiatives and meeting the financial targets outlined in” the firm’s program to boost efficiency and revenue, spokesman Wayne Mielke said in an e-mailed statement. “We believe we are well-positioned to drive enhanced shareholder value as we continue to provide high-quality financial services and build lasting client relationships.”
Still, the CEO should leave before next year’s annual meeting if the firm can’t find a buyer, Mayo said, adding that he believes there’s a chance shareholders could vote him out during the gathering.
“Let’s hold large banks accountable,” Mayo said. “Let’s fix improper incentives before the bad results that happen. We talked about this before the financial crisis, we’re talking about it now. Comerica’s a test case for whether or not the banking industry truly has reformed.”