Comerica Focused on Cost Control; Should You Hold? - Analyst Blog

On Dec 1, 2014, we issued an updated research report on Comerica Incorporated (CMA). Shares of this Texas-based major regional bank have gained over 5% in a year's time. 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.

Comerica's non-interest expenses declined 3.4% year over year in the nine months ended Sep 2014. The company has been able to control several cost overheads in the past couple of years. Reaffirming the previous guidance, the company expects non-interest expense to further decline in 2014, primarily owing to reduced legal costs and more than 50% decline in pension expenses.

Also, we remain optimistic about the company's improving loan portfolio, which should offset margin pressure to some extent in the near term. During the nine months ended Sep 2014, total loans increased 4% year over year. For fourth-quarter 2014, management expects average loan balances to exhibit slight increase sequentially, while full-year 2014 average loans are expected to grow around 5% year over year.

However, we remain cautious owing to the downbeat guidance for top-line growth. For 2014, management expects net interest income to decrease owing to the continued decline in purchase accounting accretion and persistent pressure from the low rate environment. Also, non-interest income is expected to exhibit a moderate decline due to lower non-customer driven income. A less diversified geographical footprint and the prevailing stringent regulatory landscape are among other headwinds.

Over the past 30 days Zacks Consensus Estimate remained stable at $3.10 per share and $3.17 per share for 2014 and 2015, respectively.

Comerica currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the finance space include Banner Corporation (BANR), Baylake Corp. (BYLK) and Ally Financial Inc. (ALLY). All these stocks sport a Zacks Rank #1 (Strong Buy).
 

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