Magazine article American Banker

Goldman Alters Top Picks and Downgrades Comerica

Magazine article American Banker

Goldman Alters Top Picks and Downgrades Comerica

Article excerpt

A Goldman Sachs Group Inc. analyst downgraded Comerica Inc. and reshuffled her list of top banking stocks, removing Bank of America Corp. and adding Wachovia Corp.

Lori B. Appelbaum cut her rating on Comerica's shares Thursday to "sell," from "neutral." She cited their recent rise in value and said she believed that the $56.6 billion-asset Detroit company's growth will slow down in the near future and the long term.

She attributed Comerica's slowing growth to a "high concentration of earnings tied to the Midwest, with modest momentum generated" across its major business lines.

The positives at Comerica, such as its stabilizing net interest margin and strong momentum in commercial lending, have already been priced into its stock, according to Ms. Appelbaum, who wrote notes on each of the three companies.

Comerica said last month that its second-quarter profits fell 8% from a year earlier, to $200 million, or $1.22 a share. Net income from business banking fell 13.6%, to $140 million, while net income from retail banking sank 26%, to $37 million.

Ms. Appelbaum expects Comerica to earn $4.80 a share this year and $4.95 next year -- the low end of the range of analysts' estimates, according to Thomson Financial. The average of their estimates is $4.84 for this year and $5.05 for next.

She also wrote that Comerica's shares, which were trading at $57.22 at midday, are approaching her 12-month target price of $59. Its stock rose 11% last month, versus a 4%-5% increase in the shares of banking companies of similar size, she wrote.

However, there is "greater upside potential in other banks with more attractive valuations and better growth/return prospects, such as Bank of America or Wachovia," Ms. Appelbaum wrote. She has "buy" ratings on both Charlotte companies.

Goldman said Ms. Appelbaum was unavailable for an interview Thursday to give more details on her list of top banking stocks. …

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