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Comerica’s 4Q Profit Beats Estimates As Loans, Deposits Increase

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Comerica reported stronger-than-expected fourth-quarter results, driven by higher loans and deposit growth. Meanwhile, net reserve release further cushioned its bottom line.

Comerica’s (CMA) earnings of $1.49 per share beat the Street's estimates of $1.19 per share but declined 19.5% year-over-year. However, earnings grew 3% sequentially, driven by “revenue growth and strong credit quality,” according to the company’s CEO Curt C. Farmer.

The bank’s revenue (including net interest income and noninterest income) of $734 million declined by about 9% year-over-year but exceeded analysts' estimates of $704 million. On a quarter-over-quarter basis revenue grew 3.4%.

Net interest income and noninterest income declined 13.8% and 0.4%, respectively, on a year-over-year basis, but improved sequentially by 2.4% and 5.2%, respectively.

As of Dec. 31, 2020, loans increased 1.8% to $51.4 billion, while deposits rose 22.8% to $70.2 billion.

As for 1Q, Comerica expects a decline in average loans. However, the company projects its average deposits to remain strong compared to 4Q levels. It forecasts net interest income and noninterest income to decline from the preceding quarter. (See CMA stock analysis on TipRanks)

Following the results, Raymond James analyst Michael Rose raised the stock’s price target to $72 (12.7% upside potential) from $71 and maintained a Buy rating. The analyst said, “While a net reserve release fueled the upside, revenue (both net interest income and fee revenue) exceeded our forecast, which was partially offset by higher expenses.”

Unlike Rose, the rest of the Street is sidelined on the stock with the analyst consensus of a Hold based on 4 Holds, 5 Buys and 3 Sells. The average analyst price target of $57.67 implies downside potential of about 9.8% to current levels. Shares slipped 0.6% over the past year.

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