CMA - Comerica: Ongoing Deposit Pressure In Q2 Limits Upside

2024-07-20 10:00:00 ET

Summary

• Comerica shares plunged over 10% after disappointing earnings, wiping out gains from the past year, as net interest income pressures persist.
• Struggles with noninterest-bearing deposit outflows are pressuring net income, making earnings growth more difficult.
• Loss of Direct Express debit card contract will lead to a $3.3 billion headwind in 2025, impacting earnings by at least $0.60.
• At ~10x 2025 earnings but with deposits shrinking, there are better opportunities in the banking sector elsewhere.

Shares of Comerica ( CMA ) plunged over 10% on Friday after reporting disappointing earnings, wiping away all gains CMA shares have delivered over the past year. CMA has struggled with noninterest-bearing deposit (NIB) outflows, pressuring net income and leaving shares a meaningful laggard. I last covered shares of CMA in April , downgrading them from a buy to a hold. With the stock down 6% since, I arguably should have downgraded them all the way to a “sell.” Given this drop and with new financials, now is a good time to revisit Comerica...

For further details see: