Like many banks, Comerica (CMA) shares are benefiting from a risk-on shift in investor sentiment toward the banking sector, as investors are increasing comfortable with the credit outlook and more positive on the prospect of improving rates. When I last wrote Comerica, I said that, "I would expect Comerica to do a little better than the average bank", and so it has, but I preferred other names to Comerica, and stocks like Citizens (CFG), First Horizon (FHN), KeyCorp (KEY), and Synovus (SNV) have all done better than Comerica over that time frame.
Sell-side analysts have significantly increased their 2021/22 earnings estimates for banks, and Comerica is no exception. Still, while I like the improved credit outlook, Comerica remains a highly asset-sensitive bank that is reliant on higher interest rates to really prosper, and I'm worried about the risk of intensify competition for middle-market loans in key markets like California and Texas. I do think that Comerica is a name to consider if you want to play the idea of earlier-than-expected Fed rate hikes, but relative to my core expectations, I think Comerica's return potential is more "okay-to-good" than "exceptional".
Read the full article here:
Comerica Seeing Better Credit Trends, But Higher Rates Remain Key
No comments:
Post a Comment