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2 Bank Stocks to Sell and 1 to Buy From Citigroup

Stocks in this article: BAC C KEY CMA NYB STI

Shares of Comerica (CMA) of Dallas closed at $32.02 Wednesday, returning 25% year-to-date, following a 38% decline last year.

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The shares trade for just over tangible book value, and for 12 times the consensus 2013 EPS estimate of $2.64.

Comerica on March 14 announced that the Federal Reserve had not objected to its capital plan, which provided up to $375 million in common share buybacks through the first quarter of 2013. The capital plan also included an increase of the company's quarterly dividend to 15 cents a share from 10 cents, which "will be considered by the Board at its April 24, 2012, meeting."

Based on the current 10-cent quarterly payout, Comerica's shares have a dividend yield of 1.25%.

Comerica will report its first-quarter results on April 17, with a consensus EPS estimate of 55 cents.

Levin assumed coverage of Comerica, lowering Citigroup's rating for the shares to "Sell" with a $29 price target,from a neutral rating, saying his call was "primarily valuation driven but we also believe there may be a near-term negative catalyst."

The analyst called Comerica "a well-run company with a highly talented and capable management team," adding that "Its C&I focused business model exposes it to that segment of the loan market which we believe will experience the highest growth over the next one to two years." Levin also said that the company's "conservative credit culture that served it well during the credit crisis."

But the analyst called Comerica "a bad stock at its current price," because the company "has the greatest gap in our coverage universe between what we project its equity spread (ROE minus cost of equity) will be in '12 and '13 and what the stock is pricing in at its current valuation."

Levin provided some very clear direction in his call, saying that "unless an investor is willing to make an implicit or explicit call that interest rates in the future will be meaningfully higher than what the forward curves are currently implying, we think he or she should sell CMA."

Citigroup estimates that Comercia will post first-quarter EPS of 61 cents, with full-year earnings of $2.31 a share for all of 2012, and 2013 EPS of $2.64.

Interested in more on Comerica? See TheStreet Ratings' report card for this stock.

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