CMA - Comerica: Higher For Longer Rates Are Challenging (Rating Downgrade)

2024-04-01 23:27:52 ET

Summary

• Comerica shares have rebounded, but are down 25% over the past five years given the long-term effects of last year's funding crisis.
• The bank's net interest income has been constrained by interest rates and a shrinking balance sheet.
• The composition of deposits and the shift from noninterest-bearing to interest-bearing accounts pose risks to net interest income.
• With a higher-for-longer rate scenario appearing more likely, shares are fully valued, and there are better opportunities.

Comerica ( CMA ) shares have rebounded solidly from a year ago as the regional banking industry has worked past the worst of its funding crisis. Still, shares are down 25% over the past five years as its deposit base was hard hit in 2023. Since upgrading shares to a buy in November , Comerica has returned over 28%, a strong absolute return that has also exceeded the S&P 500's 20% gain. However, some data in its March investor update has underwhelmed me, and I would now take profits with my $55 target having been attained....

For further details see: