On Mar 20, 2013, we reiterated our Neutral recommendation on
) based on its better-than-expected fourth-quarter results.
However, we are concerned about a decline in the net interest
Comerica's fourth-quarter earnings of 68 cents per share beat the
Zacks Consensus Estimate by 4 cents. Better-than-expected results
reflected growth in its top line along with reduced expenses.
Further, growth in average loans and average deposits coupled
with improved credit metrics were positives in the quarter.
However, a decline in the net interest income was a headwind.
Following the fourth-quarter results, the Zacks Consensus
Estimate for 2013 advanced by a penny to $2.72 per share over the
last 60 days. The Zacks Consensus Estimate for 2014 also
increased by a penny to $2.78 per share over the same time frame.
Hence, Comerica now has a Zacks Rank #3 (Hold).
Comerica remains focused on maintaining steady capital levels.
This is further evident from the clearance of the 2013 stress
test and the approval of its capital plan. Further, the company
has been relentlessly trying to realign its balance sheet in
accordance with the regulatory changes, post the meltdown, to
remain afloat. All these initiatives are expected to go a long
way in improving the company's financials in the subsequent
We are also impressed with its continuous geographic
diversification beyond its traditional and slower-growing Midwest
markets, which could help drive growth over the next cycle.
Moreover, we also remain encouraged by Comerica's profit
improvement plan that focuses on revenue enhancements and expense
reduction initiatives. Additionally, the incremental benefits
from the Sterling acquisition and revenue synergies should
position the company well for future growth.
However, Comerica's pressurized net interest margin is a cause
for concern. Further, the company derives the major part of its
total revenue from Calif. and slower-growth Mich. where the
economic environment has been increasingly challenging over the
past few years. This has adversely affected its results. Further,
loan growth has moderated over the past year, and growth in fee
income remains modest.
While commercial and industrial loans are picking up, the
run-off of the commercial real estate is likely to limit overall
growth of the loan portfolio. We are also concerned about the
company's top-line growth, which continue to be impacted by the
low rate environment and sluggish economic recovery.
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Other Banks Worth Considering
Other banks that are performing better than Comerica and are
worth a look include
Meta Financial Group, Inc.
Flagstar Bancorp Inc.
) and First Defiance Financial Corp. (
). All these stocks carry a Zacks Rank #1 (Strong Buy).