Company: CMA
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000028412-25-000108
Chunk: 171

Company: COMERICA INC
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 171
---
 prices and bond spreads indicative of lower credit risk in the market. 

The allowance for credit losses incorporates risks not captured in the underlying model, primarily forecast risk. In management’s view, forecast risk at December 31, 2024 was lower than at December 31, 2023 due to a tightening of the economic scenarios, signaling an overall decrease in uncertainty. Uncertainties considered by management at December 31, 2024 focused on portfolios with incremental monitoring, such as leveraged, senior housing and automotive production loans.

The economic forecasts informing the current expected credit loss (CECL) model continue to reflect the cumulative lagged effects of the FRB's tight monetary policy between 2022 and 2024 that are weighing on the real economy, as well as several years of elevated inflation that largely depleted the excess savings that households accumulated during the pandemic. Energy prices are projected to level off amid crosswinds from the Russia-Ukraine and Middle East conflicts, rising U.S. crude production and weak demand from China and other major foreign economies. Residential real estate prices are generally stronger than commercial real estate property prices, which face continued headwinds from the long and variable lags by which the FRB's tighter monetary policy affect real asset prices and an overhang of office space supply.

A reversion to trend after the boost from expansionary fiscal policy fades is expected to contribute to a moderation of economic growth in 2025 and 2026. Price pressures are forecasted to continue to revert toward to pre-pandemic norms as the modest margin of slack which opened in the economy's productive capacity in 2024 cools pricing power. The FRB is expected to gradually normalize its monetary stance but not return interest rates to their pre-crisis levels.

F-20

These factors shaped the two-year reasonable and supportable forecast used by the Corporation in its CECL estimate at December 31, 2024. The U.S. economy is projected to grow at a below-trend rate through 2025 before gradually normalizing to its trend growth rate. The unemployment rate is forecasted to move somewhat higher as private hiring remains subdued. Forecasts for other key economic variables are generally consistent with those of GDP and unemployment rate, while interest rate forecasts reflect market expectations and recent guidance from the FRB. The following table summarizes select economic variables representative of the economic forecasts used to develop the allowance for credit losses estimate at December 31, 2024.

Economic VariableBase ForecastReal GDP growthGrowth slows to 1