Where quality is concerned, it’s hard to beat Commerce Bancshares (CBSH) – conservatively run and with a strong mix of non-spread income sources, Commerce is a strong “all weather” regional bank that has generated impressive above-average returns over the long term. On the other hand, Commerce has more capital on hand than it can use and the growth is not very impressive, as there’s little Commerce can do to drive loan growth in the present environment.
I’ve been concerned about Commerce’s valuation for some time, and the shares have underperformed over the last year and since my last update on the company, as investors have shifted toward names with higher risk and better growth prospects. It remains difficult to make a valuation argument for Commerce, and while I do think the underlying long-term results will be good, that already seems anticipated by today’s share price.
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