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Comerica Well Poised to Benefit From GEAR Up Initiatives

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Comerica Incorporated (CMA - Free Report) remains on track to improve its financials through GEAR Up initiatives. Also, the company reported rising fee income despite a sluggish market. Its steady capital deployment activities continue to enhance shareholder value. However, Comerica’s exposure to commercial loans remains a headwind.

The company is well poised to grow with the help of its revenue and efficiency enhancing initiatives or GEAR Up initiatives. This is expected help the company achieve annual pre-tax income of about $270 million by year-end 2018. Further, Comericaseeks to achieve $125 million cost savings target for 2017.

The company has reported increased non-interest income over the last two years, supported by cross-sell opportunities, including wealth management products such as fiduciary and brokerage services. Further, management expects 4-6% increase in fee income in 2017 through modest growth in treasury management and card fees, and wealth management products.

Also, Comerica’s capital strength can be judged from its capital deployment activities. It has a share repurchase plan of up to $605 million for a four-quarter period (ending second-quarter 2018) in progress. Also, as part of its 2017 capital plan, the company raised its common stock dividend by 15% in July 2017. Further, these activities look sustainable as Comerica’s debt/equity ratio and dividend payout ratio compare favorably with the broader industry.

However, Comerica’s significant exposure to commercial loans (nearly 64% of the total loans) keeps us apprehensive. If the housing sector weakens, it would adversely impact the company’s financials.

Some stocks in the finance space worth considering are PNC Financial Services Group, Inc. (PNC - Free Report) , M&T Bank Corporation (MTB - Free Report) and KeyCorp (KEY - Free Report) . All three stocks have been witnessing upward revisions in earnings estimates.

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