Comerica (CMA) has made some real progress since my last update on the company, with credit quality in particular improving noticeably faster than I (or the Street) expected. Weak near-term spread leverage remains a real challenge, but Comerica is one of the most asset-sensitive banks I follow, so when rates start moving, there’s a significant source of earnings momentum waiting in the wings. I was also encouraged by the signs of loan growth in the quarter, and with dealer floorplan loan balances as low as they are, this too could be a real source of growth over the next year or two.
With the shares up about 20% since my article, beating regional banks by around 7% and outperforming peers like Cullen/Frost (CFR) and Prosperity (PB), but not U.S. Bancorp (USB) or Wells Fargo (WFC), I can’t say that the improvements have gone unnoticed or unrewarded. I do believe that Comerica is in better shape today, though, and while the prospective return isn’t as strong as here as it may be for other banks, a stronger economy than drives stronger-than-expected loan growth and sooner-than-expected rate hikes would unlock a lot of earnings upside at Comerica.
Read the full article at Seeking Alpha:
Comerica: Commercial Loan Interest Picking Up, Rates Remain A Key Factor
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