Comerica May Not Hit Return On Equity Goal Without Interest Rate Hikes

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BMO Capital kept its Market Perform rating on
Comerica IncorporatedCMA
, but lowered the estimates and price target.
,p> It now has a one-year price target of $41, down from $45, which is based on 0.95x 2017 estimated year-end TBV per share of $43.

The analysts mentioned they are unsure about the company's ability to reach double-digit ROE without the help of higher rates. They reduced the EPS estimates by 6 percent to $2.44 for 2016 and by 12 percent to $2.83 for 2017, assuming no Fed rate hike through the end of 2017, compared to four hikes estimated previously, and a flatter yield curve.

Related Link: Citi Saw Better-Than-Expected Stress Test Results From The Banks They Cover

The analysts expect 10 percent annualized loan growth in the second quarter. Accordingly, Comerica's management believes the energy-related losses were in line with estimates, implying the possibility of a release of the 8 percent energy-related reserve at some later point. "While NCOs are expected to be 45-55 bp for the rest of 2016, we expect the LLP to decline from $148 million in 1Q to $67 million in 2Q. Management indicated that credit quality remains strong, outside of the energy portfolio," wrote BMO.

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Posted In: Analyst ColorLong IdeasPrice TargetReiterationAnalyst RatingsTrading IdeasBMO Capital
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