Does Fifth-Third + Comerica = Value?

October 9, 2025 | So the $200 billion asset Fifth-Third Bank (FITB) is buying $80 billion asset Comerica Incorporated (CMA) in an all-stock transaction. Is this the start of a wave of similar deals among regional banks? Hopefully not. This deal neither creates great shareholder value nor promises significant synergies, but it does make for a bigger regional bank with so-so financial metrics. As we discuss below, essentially FITB is rescuing CMA shareholders.

The transaction is justified by FITB “to gain scale and diversify its business, expand into high-growth U.S. markets like Texas and California, and strengthen its middle-market commercial banking capabilities.” The deal will create the ninth-largest U.S. bank by assets, in theory allowing the combined entity to compete more effectively, reduce reliance on interest income with fee-based services, and leverage Comerica's strong commercial and wealth management expertise. Or at least that is the official story. 

Comerica Financial and Edsel Ford

The predecessor of Comerica was founded in Detroit in 1849 as the Detroit Savings Fund Institute, evolving through various mergers and name changes to Detroit Bank & Trust. Detroit was the most significant banking market in the US in the 1930s, as we noted in our 2017 book “Ford Men: From Inspiration to Enterprise.” You can buy a new copy of Ford Men signed by the author in The IRA store while they last.  

A selfish and idiosyncratic Henry Ford helped to precipitate the Banking Crisis of March 1933, one of the early reasons for our research interest in the Great Depression. But his son Edsel Ford personally supported the Detroit banks. Even as the great inventor pushed the nation into Depression a month before FDR took office in 1933, Edsel Ford bravely founded a new bank and one of the predecessors of Comerica. Had the great inventor possessed a fraction of the intelligence and compassion of his son Edsel, Henry Ford would have easily won the presidency of the United States in 1916. As we wrote in Ford Men:

“On the Sunday before the [February 13, 1933] meeting between Ford and Ballantine, The Detroit Free Press carried an interview with Couzens where the senator stated that the weak banks should be allowed to go under and, after a general moratorium, the stronger banks would be allowed to reopen. When Clifford Longley, Ford Motor Company’s counsel and a director of Guardian Trust Company, reported Couzens’ remarks, Henry Ford remarked, ‘For once in his life, Jim Couzens is right.’ On February 14, 1933, all banks in the state of Michigan were closed for eight days by order of Governor William A. Comstock. This began a domino effect that would lead to the collapse of the nation’s financial system three weeks later. Michigan was forced to default on its bonds and the state government was crippled, a default that rippled through the savings and balance sheets of individuals and companies around the world.”

In 1933, Manufacturers National Bank of Detroit, Comerica's future merger partner, was founded by Edsel Ford, another example of the younger Ford’s sense of responsibility to his community – something he shared with Senator James Cousins, Henry Ford’s original business partner. But for James Cousins, there would be no Ford family fortune. Manufacturers bought United States Savings Bank in 1952 and in 1955 merged with Industrial National Bank. By that time, however, Detroit was experiencing a gradual decline in terms of economic prospects. 

In 1955, the Detroit Bank acquired the Detroit Trust Company, forming Detroit Bank & Trust, which itself merged with The Birmingham National Bank, Ferndale National Bank, and Detroit Wabeek Bank & Trust Company in 1956. In 1982, the Detroit Bank & Trust Company was renamed Comerica Bank to reflect its growing ambitions. Those ambitions were not fully realized, however, since CMA has grown mostly via acquisitions rather than organic growth. 

In 2007, after acquiring other banks and expanding into California and Texas, Comerica moved its headquarters to Dallas just as the Great Financial Crisis exploded onto the scene. It is fair to say that at first the TX business community did not know what to make of CMA, which located its new HQ in one of the more prominent office towers in downtown Dallas. But today downtown Dallas is as empty and underutilized as are many other urban centers and the pricey overhead is very visible in CMA’s financials.

Does FITB + CMA = Value?

So is the all-stock purchase of CMA by FITB a good deal for shareholders? It is certainly a good deal for CMA shareholders, who might even be characterized as receiving a rescue of sorts from the folks at FITB --and at a 30% premium to tangible book. Indeed, CMA's assets have fallen more than 10% since 2023 as core deposits have likewise declined.

Based in Cincinnati, Fifth-Third is a sturdy regional banks that occasionally expresses desires to enter more competitive wholesale markets, like residential mortgage warehouse lending, but fortunately has not done so in such a scale as to threaten the bank. 

Each bank has roughly the same breakdown in terms of net interest income and non-interest fee income, on of the supposed benefits of the combination. Both banks are peer performers overall, but FITB is far stronger financially and in terms of market performance.  FITB actually ranked 9th overall in the WGA Top 100 Banks in Q3 2025, while CMA ranked 43rd.  

WGA Top 100 Banks

A side by side comparison of the two banks is below showing key metrics vs average assets in percent. We use the consistent benchmarks published by the Fed and other regulators via the Bank Holding Company Performance Reports distributed by the FFIEC. 

Source: FFIEC

The numbers shown in red indicate where the two banks underperform the average for Peer Group 1. Obviously CMA is ten points out of line with FITB in terms of operating efficiency. CMA brings half a billion in goodwill and intangibles to the combination, plus $2.5 billion in mark-to-market losses (AOCI) on the bank’s underperforming bond portfolio. And as noted above, CMA has been shrinking pretty rapidly since 2023, when Silicon Valley Bank and several other regionals failed.

FITB itself has $3.5 billion in goodwill and another $3.5 billion in mark-to-market losses (AOCI) on its books so these two middle-market mediocrities certainly have something in common. Credit costs at CMA are below peer, but FITB was 50% above peer in terms of credit costs in Q2 2025. But the low net loss numbers at CMA conceal a significant amount of loan modifications, principally in multifamily mortgage loans.

Members of the Sell Side analyst community may see value creation in this combination, but why do we feel that FITB + CMA just creates a larger target in the coming credit correction? CMA was badly wounded in 2023, but the bank does not seem to have trimmed expenses as the balance sheet has shrunk involuntarily. The efficiency ratio for CMA was 56% at the end of 2022 vs 68% today.

We need to see FITB management quickly combine these two banks and push down CMA expenses a lot in the next 12 months if this merger has a real chance of success. Or to put it another way, if FITB does not take a very tough minded approach to getting CMA's operating expenses under control, we won't be seeing FITB in the top ten US banks tracked by the WGA Top 100 Banks again anytime soon.

And BTW, both banks need to stop dawdling when it comes to managing the treasury and earning assets. Any result below peer average for securities returns is unacceptable and should mean that people are getting fired. This is not just a problem for FITB and CMA, but a large portion of the US banking industry. The chart below shows the gross yield on securities for the top-seven depositories by assets. Look who's on the top and the bottom. Notice that both Truist Financial (TFC) and PNC Financial (PNC) have restructured and dramatically improved their returns.

Source: FFIEC

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