On Monday, Citi updated its stance on Comerica Incorporated (NYSE:CMA) stock, increasing the bank's price target to $63 from the previous $51 while maintaining a Neutral rating.
The adjustment follows Comerica's recent performance, which indicated a stronger near-term pre-provision net revenue, excluding Express Direct related business activities.
The analyst from Citi highlighted a temporary relief from swap headwinds as a significant factor for the anticipated rise in net interest income (NII) over the forthcoming quarters.
This expected increase in NII was seen as slightly underestimated by the market, which contributed to Comerica's outperformance compared to its peers last Friday. Additionally, the bank's announcement of a share repurchase program was noted as a positive influence on its stock performance.
Looking ahead to 2025, the analyst noted that while growth prospects appear limited, this could help Comerica avoid additional expense increases and address any remaining credit concerns. The bank's core results were deemed modestly better than anticipated, although the analyst suggests that further upside might be constrained without a significant catalyst.
The revised price target reflects an increased confidence in Comerica's short-term financial prospects, particularly in terms of NII. The bank's recent actions, including the share repurchase plan, have provided a favorable outlook in the eyes of Citi, even as the long-term growth potential remains muted.
In other recent news, Comerica Bank has been the subject of updated analysis by Barclays (LON:BARC) and Evercore ISI. Barclays increased Comerica's price target to $66.00, maintaining an Underweight rating, following the bank's earnings per share outperforming expectations due to lower expenses, credit loss provisions, and tax rates. Meanwhile, Evercore ISI maintained its In Line rating, citing positive expectations for the bank's net interest income and net interest margin.
Recent developments include Comerica's third-quarter earnings of $184 million, which exceeded expectations. This was driven by robust customer activity, a 1.3% increase in average deposits, and a net interest income of $534 million. The bank's tangible book value grew by 23%, and the CET1 ratio improved to 11.97%.
Looking ahead, Comerica anticipates a more robust average loan book, despite a projected decline in brokered time deposits and a relatively stable average customer deposit base. The bank is also projected to resume share repurchases, signaling a potential return to more shareholder-friendly capital distribution policies. However, the outlook for 2024 includes a projected 5% decline in average loans and a 3-4% decrease in average deposits.
InvestingPro Insights
Recent data from InvestingPro adds depth to Citi's analysis of Comerica Incorporated (NYSE:CMA). The bank's market capitalization stands at $8.62 billion, with a P/E ratio of 16.17, suggesting a reasonable valuation in line with the sector. Notably, Comerica's stock has shown remarkable strength, with a 1-year price total return of 80.75% and a 3-month return of 30.43%, supporting Citi's observation of the bank's recent outperformance.
InvestingPro Tips highlight that Comerica has maintained dividend payments for 54 consecutive years, underscoring its financial stability and commitment to shareholder returns. This aligns well with the positive sentiment surrounding the bank's recently announced share repurchase program. Additionally, the stock is trading near its 52-week high, with its price at 98.3% of the 52-week peak, reflecting investor confidence in Comerica's near-term prospects.
For investors seeking 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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