Barclays (LON:BARC) has updated its analysis of Comerica (NYSE: NYSE:CMA), increasing the bank's price target to $66.00 from the previous $56.00, while keeping an Underweight rating on the stock.
The adjustment follows Comerica's earnings per share (EPS) outperforming expectations, attributed to lower-than-anticipated expenses, provisions for credit losses, and tax rates. Despite nonperforming assets (NPAs) rising by 6%, these factors contributed to the positive outcome.
Comerica's net interest income surpassed forecasts, driven by a significant rise in average earning assets. This increase was primarily due to reallocating cash collateral from the CME to the Federal Reserve. However, the bank's net interest margin did not meet expectations, and fee income was also reported to be weaker than anticipated.
Looking ahead to the fourth quarter of 2024, while net interest income is expected to grow, the projection is tempered by the anticipation of reduced fee income and elevated expenses.
For the upcoming quarter ending in December 2024, Comerica anticipates a more robust average loan book, with broad-based momentum expected to counterbalance the rate-related pressure in the Commercial Real Estate (CRE) sector.
In other recent news, Comerica Bank reported third-quarter earnings of $184 million, exceeding expectations. This was driven by robust customer activity and improved financial metrics, including a 1.3% increase in average deposits and net interest income of $534 million. The bank's tangible book value grew by 23%, and the CET1 ratio improved to 11.97%.
Evercore ISI maintained its In Line rating for Comerica, citing positive expectations for the bank's net interest income (NII) and net interest margin (NIM). Comerica's management confirmed the paydown of approximately $900 million in higher-cost brokered deposits and anticipates a similar reduction in the fourth quarter. This, along with Comerica's liability sensitivity, is expected to lead to an improvement in the NIM.
Despite these promising developments, Comerica's outlook for 2024 includes a projected 5% decline in average loans and a 3-4% decrease in average deposits. However, management remains optimistic about net interest income growth beyond 2024.
InvestingPro Insights
To complement Barclays' analysis of Comerica (NYSE:CMA), recent data from InvestingPro provides additional context to the bank's financial position and market performance. As of the latest available data, Comerica's market capitalization stands at $8.62 billion, with a price-to-earnings (P/E) ratio of 16.17, indicating a moderate valuation relative to its earnings.
InvestingPro Tips highlight that Comerica has maintained dividend payments for an impressive 54 consecutive years, underscoring the bank's commitment to shareholder returns even during challenging periods. This aligns with the article's mention of potential resumption of share repurchases, further emphasizing Comerica's focus on capital distribution to shareholders.
Additionally, InvestingPro data shows that Comerica has experienced a strong return over the last three months, with a price total return of 30.43%. This robust performance is consistent with the bank's recent earnings beat and Barclays' increased price target. However, an InvestingPro Tip cautions that the RSI suggests the stock may be in overbought territory, which investors should consider alongside the positive momentum.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Comerica, providing a deeper understanding of the bank's financial health and market position.
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