Comerica Inc.
(
CMA
) has been placed on review for a possible downgrade by Moody's
Investors Service, a division of
Moody's Corporation
(
MCO
) on concerns about the company's capability to return to its
typical profit level.
Comerica's senior debt is currently rated at A2 by the rating
agency. According to the agency, in a stressed operating
environment and particularly due to the continuous low interest
rate atmosphere, it would be difficult for Comerica to bounce back
to its prior profit levels. As a result, Comerica's strategic
actions to counter such challenges would be reviewed.
While Comerica has been posting profits in recent times on the
back of an improvement in credit quality and lower loan loss
provisions, significant top-line expansion still remains elusive.
However, Comerica has been boosting investors' confidence by
redeploying capital.
Recently, the company's board of directors approved its plan to
continue with the current share repurchase program in the first
quarter of 2012. Management expects the share repurchase program
along with dividend payments to result in a payout of up to 50% of
net income for the first quarter of 2012. During the third quarter,
Comerica also completed the acquisition of Sterling Bancshares
Inc.
Going forward, we believe that Comerica's strategic expansion
efforts and focus on cost containment are a strategic fit. The
acquisition of Sterling will enhance its growth in Texas. The
company is focused on opportunities to accelerate growth,
particularly in the urban markets of California and Texas.
Continuous geographic diversification beyond Comerica's traditional
and slower-growing Midwest markets could drive growth over the next
cycle.
Capital deployment efforts also inspire investors' confidence in
the stock. Yet, a challenging economic environment, its significant
exposure to riskier areas such as commercial real estate markets,
lack of meaningful loan growth and regulatory headwinds are the
downsides.
Comerica currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
COMERICA INC (
CMA
): Free Stock Analysis Report
MOODYS CORP (
MCO
): Free Stock Analysis Report
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