Market Overview

Wedbush Turns Bullish On Comerica, Says Bank Is A Sector Standout

Wedbush Turns Bullish On Comerica, Says Bank Is A Sector Standout

Comerica Incorporated (NYSE: CMA) has multiple levers ahead that should help the bank realize superior EPS growth over the coming years, according to Wedbush.

The Analyst

Wedbush's Peter Winter upgraded Comerica's stock rating from Neutral to Outperform with a price target lifted from $103 to $111.

The Thesis

Comerica is a standout within the bank sector, and investors should be buyers of the stock for four reasons, Winter said in the upgrade note. (See the analyst's track record here.) 

They are:

  • Comerica realized the highest increase in loan yields, as 90 percent of its loans are floating and mostly tied to LIBOR or prime rate.
  • The bank is one of the strongest deposit franchises,  as 55 percent of its deposits are non interest-bearing, as opposed to the median of 33 percent among peers, Winter said. Comerica maintains the lowest time deposits as a percentage of total deposits at 5 percent versus 10 percent for its rivals.
  • Comerica has been "fairly aggressive" in boosting its dividend payout, but falls short of its peers with a dividend payout ratio of 24 percent versus the regional bank median of 31 percent, Winter said. But given the company's encouraging prospects, investors could expect a shift to an above-average capital return profile, he said. 
  • Banks with $50 to $100 billion in assets — including Comerica — will see "instant relief" from the passage of regulatory reform in which parts of Dodd-Frank will be eased, the analyst said. The bill is on its way to the House and should result in incremental M&A activity, higher capital returns and lower regulatory expenses for the industry as a whole, according to Wedbush. 

Price Action

Shares of Comerica were trading higher by 2.25 percent at the time of publication Monday. 

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Latest Ratings for CMA

Mar 2020CitigroupMaintainsNeutral
Mar 2020B. Riley FBRMaintainsNeutral
Mar 2020Morgan StanleyMaintainsEqual-Weight

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