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Comerica's (CMA) Ratings Affirmed by Moody's, Outlook Stable

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Moody's Investors Service — a rating arm of Moody's Corporation (MCO - Free Report) — affirmed all the ratings of Comerica (CMA - Free Report) and its subsidiaries. The banking giant’s long-term issuer rating and a senior unsecured rating have been affirmed at A3. The bank’s subsidiary has deposit ratings of Aa3/Prime-1 and a standalone baseline credit assessment (BCA) of a2.The bank’s counterparty risk assessments is A1(cr)/Prime-1(cr).

Further, Comerica’s shelf registration has been assigned prospective ratings. The shelf senior unsecured and subordinate is rated at (P)A3, while (P)Baa1 is assigned for cumulative preferred stock, and (P)Baa2 for non-cumulative preferred stock.

The rating firm’s outlook for the bank remains “stable”.

Rationale Behind the Affirmation

The rating affirmation follows Comerica's strong asset quality performance and traditional credit culture, including conservative underwriting standards. Moreover, solid liquidity position is another driving factor.

Per Moody’s, the bank’s capital position is below the median of its peers, and Comerica’s inconsistent earnings due to the historical low level of interest rates posed a credit challenge.

Further, Comerica maintains modest growth targets and a diversified loan mix with no exposure to real estate. Nevertheless, though the bank is exposed to an above-average energy exposure due to its Texas footprint, it met Moody's expectations in asset-quality performance and risk management during the energy sector slump.

Per Moody's, rising rates aiding Comerica's profitability is expected to record a lower payout ratio. In addition, capital metrics of the bank are expected to remain stable in the near term, along with its modest growth expectations.

However, per the rating agency, Comerica might get removed from the Comprehensive Capital Analysis and Review (CCAR) process by the Economic Growth, Regulatory Relief and Consumer Protection Act which might result in higher shareholder returns and lower capital ratios. Notably, this act amplifies total consolidated assets from $50 billion to $250 billion of a bank to get qualified for a systemically important financial institution (SIFI).

Comerica currently carries a Zacks Rank #3 (Hold). The company’s stock has gained around 24% over the last six months, outperforming 2.2% growth recorded by the industry.



 

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