Magazine article American Banker

Good Signs for Comerica Fail to Impress Analysts

Magazine article American Banker

Good Signs for Comerica Fail to Impress Analysts

Article excerpt

Analysts remain cautious about Comerica Inc. even though it is reporting good demand for commercial loans.

Though they say they see little downside risk to the stock, analysts point out that the Detroit company is already trading at a premium to other banks because investors believe it will do well when commercial lending picks up. Comerica gets almost three-fourths of its profit from business banking.

Jeff Davis of First Horizon National Corp.'s FTN Midwest Research downgraded Comerica shares to "neutral" from "buy" Monday for valuation reasons. Mr. Davis said the stock has risen 16% since he upgraded it on May 13; in the same period there has been a 3% run-up in FTN's large-cap bank stock index. There is "limited upside," he said, because Comerica shares now trade within 2% of his price target of $60.

Mr. Davis, who recently met with Comerica's management, said its outlook for the next two to three years is bright but that right now its earnings power is not matching its earnings potential. He said that commercial lending, which contracted from 2001 to 2003 and is flat this year, will expand in 2005 and 2006. "We just don't know by how much," he said in an interview Monday.

Scott Siefers of Sandler O'Neill & Partners LP raised his price target to $60 from $57 after a visit with Comerica's management. He said he now has more "comfort" with the company's strategic direction but he continues to rate the stock "hold."

Both analysts said that though commercial lending is up, corporate borrowers' use of lines of credit remains low against historical levels. …

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