On Jun 25, we issued an updated research report on Comerica Incorporated CMA. Shares of this Texas-based major regional bank have recorded a year-to-date return of 14.2%. We believe this growth story has been aided by the company’s continued focus on expense management apart from several other positives including an increasing loan portfolio, strong capital position, steady capital deployment activities and improving credit quality.
We view Comerica as an adequately capitalized bank. In Mar 2015, following the release of the Federal Reserve’s Dodd-Frank Act supervisory stress test 2015 (DFAST 2015) results, the company increased its common stock dividend by 5%. Also, the company announced an increase in the number of shares of common stock under its share repurchase authorization by up to 10 million additional shares.
Also, we remain optimistic about the company’s improving loan portfolio, which should offset margin pressure to some extent in the near term. Total year-end loan balance increased at a CAGR of 4.8% over the last 5 years (2010–2014). Notably, based on the current market environment, management expects average loan balances in 2015 to grow at the same rate as 2014.
Comerica’s non-interest expenses declined at a 4-year (2011–2014) compounded annual growth rate (CAGR) of 2.8%. Moreover, efficiency ratio witnessed a decline from 72.73% in 2011 to 64.31% in 2014. The company has been able to control several cost overheads in the past couple of years. Though the company expects a rise in expenses in 2015, its focus on driving long-term efficiency keeps us optimistic.
However, we remain cautious owing to the downbeat guidance for top-line growth. For 2015, management expects net interest income to remain stable owing to the continued decline in purchase accounting accretion and persistent pressure from the low rate environment. Excluding the impact of change in accounting presentation tied with the card program, the company expects non-interest income to remain relatively stable. A less diversified geographical footprint and the prevailing stringent regulatory landscape are among other headwinds.
Over the past 30 days, the Zacks Consensus Estimate decreased slightly to $3.00 per share for 2015, while remained stable at $3.49 per share for 2016.
Comerica currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked finance stocks worth considering include KeyCorp. KEY, Commerce Bancshares, Inc. CBSH and MidWest One Financial Group, Inc. MOFG. All three stocks sport a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment