Comerica shares fall as bank likely to lose exclusive Treasury contract

Key conclusions

Comerica shares fell Friday after the regional bank said in its second-quarter earnings report that it likely won’t be selected to exclusively continue providing services for Treasury-issued Direct Express cards.
Since 2008, Comerica has partnered with MasterCard and the federal government to provide cards to federal benefit recipients who do not have a bank account.
The bank’s quarterly profit beat estimates, but Comerica joined other banks that reported lower net interest income.

Comerica (CMA) shares fell Friday despite reporting second-quarter results that beat estimates. The regional bank said it had received information from the U.S. Treasury that it likely would not be selected to continue to exclusively offer the Direct Express card.

Comerica’s quarterly earnings beat analyst expectations, but earnings and net interest income (NII) fell year over year as higher deposit costs offset the benefits of higher interest rates for both regional and large banks.

Comerica’s net income fell to $206 million from $273 million in the year-ago quarter, but beat Visible Alpha analysts’ consensus estimate of $165.4 million.

Comerica likely to lose Direct Express card

The bank provided information on its partnership with the U.S. Treasury, with which it has been working since 2008 to provide the Direct Express card, which enables the distribution of federal benefits to people who do not have a bank account. Comerica said the card had “approximately 4.5 million federal benefit recipients as of June 30, 2024.”

Treasury initially notified Comerica that it likely would not be selected to continue offering the card, after being selected to support the program in 2008, 2014 and 2020. Comerica said its agreement with Treasury is set to expire early next year.

Comerica shares fell 12% to $49.50 as of 11:10 a.m. ET Friday, marking its first negative close this year.