Company: CMA
Filing Date: 2025-04-30
Form Type: 10-Q
Source: 0000028412-25-000154
Chunk: 110

Company: COMERICA INC
Filing Date: 2025-04-30
Form: 10-Q
Item: Part I, Item 1
Chunk 110
---
 the Corporation's portfolio, even as elevated interest rates and persistent inflation continued to pressure customer profitability.

Economic forecasts as of March 31, 2025 were relatively unchanged compared to the December 31, 2024 vintages, reflecting benign economic data at quarter-end and improving conditions over the forecast period. A favorable one-quarter forward shift across the forecast timeframe resulted in relatively improved Gross Domestic Product (GDP) growth, unemployment trends and bond spreads across the reasonable and supportable period as of March 31, 2025 compared to December 31, 2024.

The allowance for credit losses incorporates risks not captured in the underlying model, primarily forecast risk. In management's view, forecast risk at March 31, 2025 was higher than at December 31, 2024, as evidenced by a higher level of stress in the downward economic scenarios. Uncertainties considered by management have broad implications for the overall economy and include the impacts of potential tariffs, persistent inflation and the fiscal deficit, amongst other risks.

The economic forecasts informing the current expected credit loss (CECL) model reflected increased uncertainty amid rapid changes in domestic and foreign economic policies. The impact of potential tariffs and changes to federal government operations were still unclear, creating challenges to economic forecasting. The FRB was assumed to gradually lower interest rates as they remain vigilant toward inflation. Consumer spending growth was seen moderating amid slower, albeit continued, growth of the real economy. Inflation was anticipated to gradually moderate as a modest margin of slack capacity opens in the labor market. Energy prices were projected to level off despite continued crosswinds from the Russia-Ukraine and Middle East wars, with U.S. crude production holding near a record high. Residential real estate property prices were expected to rise at more moderate rates, while commercial real estate prices faced headwinds, both of which reflected the long and variable lags through which the FRB's tighter monetary policy prior to the beginning of rate cuts in the third quarter of 2024 affected the real economy.

Downside risks to growth from trade conflicts, cost-of-living pressures on household finances and less expansionary fiscal policy were projected to collectively contribute to slower growth in 2025 and 2026. Reduced demand for office space and subdued economic activity in the central business districts of major metro areas are also expected to persist as drags on the broader economy. The FRB's gradual rate cuts driven by a softening labor market and expectations of disinflation would aim to contain the risk of recession.

These factors shaped the