Comerica: The Good, The Bad and The Ugly
The Street has already taken down estimates, making this again, a pricey, underperforming regional headquartered in a city in the midst of a recession.
Comerica (CMA) reported 3Q '07 headline EPS from continuing operations of $1.17 per share. Stripping out some one-time items ($11 mln of gains from principal investing and warrants, $4 mln in securities gains and $2 mln in costs related to the company's headquarter move), I get a run-rate earnings of $1.11, missing consensus by 11 cents.
- CMA's core revenues declined 4.4% on an annualized basis due to pressure on both spreads and fee revenues.
- NIM compressed by 10 bps, which was 2x the amount the Street was expecting.
- Average loans were flat with the prior quarter.
- Average deposits declined sequentially.
- Expense growth was above forecast.
The Ugly: Credit Trends
The Street was expecting bad, and they came in awful.
- Net charge-offs were reported at 0.32 percent of average loans, well above the 0.21 percent forecasted and .24 percent in prior quarter. The level of NPAs increased 12 percent.
- This despite the large sale of loan book means the company is left holding some pretty lousy loans.
- It transferred $94 million of loans to non-accrual status in the quarter, yet the q-q increase in NPAs was only $32 million-this is a mismatch!
- Provision expenses exceeded net charge-offs by $5 million.
Bottom-line: there might be a good skew trade out there. Credit and margin headwinds will accelerate from current levels. The Street has already taken down estimates, making this again, a pricey, underperforming regional headquartered in a city in the midst of a recession. I think the stock, at best, is worth $45 (11% downside).
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter