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Three Undervalued and Overlooked Banks

Stocks in this article: CMAUBNKWFD

Although the company made our list by posting a positive return on assets stretching back to the start of last year, Comerica suffered a third-quarter net loss of $15 million, or 10 cents a share, after factoring in preferred stock dividends paid to the Treasury. Still, the bank beat analysts' estimates of a loss of 53 cents, based on a survey by Thomson Reuters.

Comerica recorded $239 million in net loan charge-offs during the third quarter, a decline from $248 million in the second quarter, and said it expected another small drop this quarter because it reduced its residential real-estate exposure.

The company's net interest margin (the difference between the average rate earned on loans and investments, and the average cost of funding) declined to 2.68% from 2.73% in the previous quarter, which Comerica attributed to "excess liquidity, which more than offset improved loan spreads and lower core deposit rates."

During Comerica's third-quarter conference call, Chief Financial Officer Beth Acton said: "The fourth-quarter net interest margin will increase as a result of maturities of higher-cost CDs and wholesale funding and a reduction in excess liquidity. In addition, we expect the margin will continue to benefit from improved loan pricing."

Comerica had a high level of capital as of Sept. 30, with a tier 1 leverage ratio of 12.45% and a total risk-based capital ratio of 16.75%.

With the bank so well-capitalized and earnings significantly affected by dividends being paid on $2.25 billion in TARP money received in November, Comerica Chief Executive Officer Ralph Babb said during the call that "we would like to pay it back as soon as feasible."

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