Comerica Slammed As A Perfect Storm Hits

Banks have had a bad year in 2020, but where most banks were slammed down by the market in March and have since rebounded a little, Comerica (CMA) has stayed flat on its back. It’s tough to find much of anything that’s going right – above-average sensitivity is hitting margins, slowing economic activity is hitting fees, loan growth is not impressive, and credit quality is eroding. Oh, and a prior cost efficiency program has probably taken out the low-hanging fruit there.

I expect further reserve-building from here, and I could easily see the charge-off ratio moving into the 2%’s. While I see Comerica having enough capital to get through this, I think there’s a very good chance that the dividend gets cut along the way. The good news, such as it is, is that I think there’s a wider cushion between Comerica and disaster than the share price reflects. I’m very much concerned that this is a dead money value trap for the near term, but it’s hard for me to see how today’s price won’t look attractive in three years’ time.

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Comerica Slammed As A Perfect Storm Hits