On Jun 17, 2013, we reiterated our Neutral recommendation on
) based on its better-than-expected first-quarter results and
continuous geographic diversification beyond the company's
traditional and slower-growing Midwest markets. However, we are
concerned about the unsettled economic environment, regulatory
overhangs and a pressure on the net interest margin.
COMERICA INC (CMA): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
PNC FINL SVC CP (PNC): Free Stock Analysis
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Comerica's first-quarter earnings of 70 cents per share beat the
Zacks Consensus Estimate by 3 cents. Better-than-expected results
reflected reduced expenses. Further, growth in average loans and
improved credit metrics were the positives.
Despite the macro pressure, Comerica's credit quality continues
to normalize. Credit metrics have been gradually improving since
2009 and continued into first-quarter 2013. Further, we are
impressed by the overall improvement in net charge-offs. This
trend is expected to continue, thereby providing room to drive
Moreover, we view Comerica as a sound asset for yield-seeking
investors. In Mar 2013, following the release of the Federal
Reserve's stress test results, the company received approval for
its capital plan and capital distributions. Notably, the share
repurchases, combined with dividends resulted in a total payout
of 77% of net income to shareholders in first-quarter 2013.
Following the first-quarter results, the Zacks Consensus Estimate
for 2013 advanced by a penny to $2.79 per share over the last 60
days. The Zacks Consensus Estimate for 2014 also increased by a
penny to $2.82 per share over the same time frame. Hence,
Comerica carries a Zacks Rank #2 (Buy).
However, with increasing competition, shift in the portfolio mix
toward lower yielding loans and lower reinvestment rates for the
securities portfolio remain concerns. Therefore, net interest
margin is likely to continue to be pressurized in the quarters
ahead. Further, the continuous effect of a low interest-rate
environment, coupled with a decline of $40-$50 million in
purchase accounting accretion, is anticipated to lead to a lower
net interest income in the upcoming quarters.
Some Major Companies to Consider
Besides Comerica, other major banks that are worth considering
JPMorgan Chase & Co.
The PNC Financial Services Group, Inc.
). All 3 companies carry a Zacks Rank #2.