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Comerica Margins Under Pressure, Energy Sector a Drag
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On Jun 21, we issued an updated research report on Comerica Incorporated (CMA - Free Report) . Shares of this Texas-based bank recorded a negative one-year return of around 16.6%.
Concerns like margin pressure, exposure to the energy sector and a stringent regulatory landscape across the financial sector limit Comerica's growth. Notably, the company recorded average negative earnings surprise of 2.56% over the last four trailing quarters.
Though non-interest expenses increased 14% year over year in 2015, and the company expects a rise in expenses in 2016, its focus on driving long-term efficiency raises optimism. Nevertheless, non-interest expenses are expected to be moderately higher. Rise in expenses reflects high technology costs and regulatory expenses, outside processing expenses, FDIC insurance expense due to recent regulatory proposal and high costs on inflationary pressures.
Moreover, provision for credit losses is expected to be higher, reflecting reserve builds for Energy in first-quarter 2016. Net charge-offs are projected in the range of 45–55 basis points. Further, the bank’s exposure to the stressed Energy sector is a major drawback. Though management considers exposures to be manageable, risk grade migration within the energy portfolio may lead to higher provisions this year.
The shift in the portfolio mix toward lower yielding loans as well as reinvestment rates for the securities portfolio has resulted in net interest margin (NIM) pressure over the past few years. Though the trend reversed in first-quarter 2016 as rates moved up, the pressure on NIM will take some time to alleviate.
Over the past 30 days, the Zacks Consensus Estimate remained stable at $2.52 and $3.22 per share for 2016 and 2017, respectively. Comerica currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in the finance space include FirstMerit Corporation , Enterprise Financial Services Corp. (EFSC - Free Report) and Heartland Financial USA, Inc. (HTLF - Free Report) . All the three companies carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Comerica Margins Under Pressure, Energy Sector a Drag
On Jun 21, we issued an updated research report on Comerica Incorporated (CMA - Free Report) . Shares of this Texas-based bank recorded a negative one-year return of around 16.6%.
Concerns like margin pressure, exposure to the energy sector and a stringent regulatory landscape across the financial sector limit Comerica's growth. Notably, the company recorded average negative earnings surprise of 2.56% over the last four trailing quarters.
Though non-interest expenses increased 14% year over year in 2015, and the company expects a rise in expenses in 2016, its focus on driving long-term efficiency raises optimism. Nevertheless, non-interest expenses are expected to be moderately higher. Rise in expenses reflects high technology costs and regulatory expenses, outside processing expenses, FDIC insurance expense due to recent regulatory proposal and high costs on inflationary pressures.
Moreover, provision for credit losses is expected to be higher, reflecting reserve builds for Energy in first-quarter 2016. Net charge-offs are projected in the range of 45–55 basis points. Further, the bank’s exposure to the stressed Energy sector is a major drawback. Though management considers exposures to be manageable, risk grade migration within the energy portfolio may lead to higher provisions this year.
The shift in the portfolio mix toward lower yielding loans as well as reinvestment rates for the securities portfolio has resulted in net interest margin (NIM) pressure over the past few years. Though the trend reversed in first-quarter 2016 as rates moved up, the pressure on NIM will take some time to alleviate.
Over the past 30 days, the Zacks Consensus Estimate remained stable at $2.52 and $3.22 per share for 2016 and 2017, respectively. Comerica currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in the finance space include FirstMerit Corporation , Enterprise Financial Services Corp. (EFSC - Free Report) and Heartland Financial USA, Inc. (HTLF - Free Report) . All the three companies carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>