On Tuesday, Truist Securities initiated coverage on Comerica Incorporated (NYSE:CMA) with a Hold rating and established a price target of $65.00 per share. The coverage by Truist Securities comes with an analysis of Comerica's financial health and market position, highlighting several key factors influencing the Hold rating.
The analyst from Truist Securities pointed out that Comerica's tangible book value has seen significant recovery, approximately 50% since the third quarter of 2023, and is projected to grow by an additional 10% over the next two years. This growth is expected to be supported by favorable conditions from bond, swap, and Bloomberg Short-Term Bank Yield (BSBY) tailwinds.
Despite these positive indicators, Truist Securities expressed concern over Comerica's recent soft loan growth and questioned the bank's capacity for growth over time. Another point of consideration mentioned in the coverage was the Return on Tangible Common Equity (ROTCE), which is anticipated to remain static at 11% for the next couple of years.
The analyst's valuation of Comerica suggests a slight upside, with a 1.2 times multiple applied to the tangible book value. This assessment is based on the expectation that investors might be waiting for the bank's loan growth to align with the long-term compound annual growth rate (CAGR) of 1.5%, which matches Comerica's 15-20 year historical levels, or potentially exceed it.
Comerica is a regional bank with a market capitalization of $8 billion and assets totaling $80 billion. The bank primarily focuses on middle-market commercial and real estate lending, bolstered by wealth management and retail banking services. The majority of Comerica's lending activities stem from shared national credit relationships, multi-family commercial real estate, and auto dealership financing, while non-interest bearing (NIB) customer deposits provide a substantial portion of funding, which is above the industry average.
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