We are reaffirming our long-term Neutral recommendation on
) based on its fundamentals and capital redeployment measures
amidst the current stressed macroeconomic environment.
After reporting encouraging results in the first quarter of 2012,
Comerica yet again came up with an impressive second quarter. The
company reported earnings per share of 73 cents. Excluding
restructuring expenses, earnings came in at 76 cents per share,
comfortably beating the Zacks Consensus Estimate of 62 cents.
Comerica's results reflect growth in its top line. The company
experienced strengthening of its average loans, helped by higher
average commercial loans. Average deposits also advanced in the
quarter. However, lower loan yields partially offset the benefit.
Furthermore, the company experienced augmentation in its fee
income. Additionally, expenses were well-controlled.
Going forward, we believe that continuous geographic
diversification beyond Comerica's traditional and slower-growing
Midwest markets could drive growth over the next cycle. Revenue
synergies from the Sterling acquisition should augment its top-line
Comerica's capital deployment initiatives through dividend payment
and share buybacks are significant of its capital strength. During
the second quarter of 2012, the company hiked its quarterly cash
dividend by 50% and authorized repurchase of additional shares of
common stock to execute its capital plan. Moreover, its solid
balance sheet and commitment to capital adequacy are encouraging.
However, with increasing competition, shift in the portfolio mix
towards lower yielding loans as well as lower reinvestment rates
for the securities portfolio and reduced accretion from the
Sterling acquisition, net interest margin is likely to continue to
be pressurized in the quarters ahead.
In addition to this, the unsettled economic environment along with
regulatory issues are likely to adversely impact and temper its
robust growth prospects. Hence, the risk-reward profile seems
balanced for Comerica and therefore our long-term Neutral
recommendation is reiterated.
However, Comerica currently retains its Zacks #2 Rank, which
translates into a short-term Buy rating. One of its closest peers,
Fifth Third Bancorp
) has a Zacks #3 Rank, implying short term a Hold rating.
COMERICA INC (CMA): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis
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