Comerica Beats But Margin Narrows Sharply (Update 1)

Despite the Fed's efforts, long-term U.S. Treasury yields have shot up over the past several weeks. UBS analyst Brian Meredith on Monday included Comerica in a list of 10 financial stocks poised to benefit greatly in a rising-rate environment.

Comerica's fourth-quarter non-interest income totaled $204 million, increasing from $197 million in the third quarter, and $182 million in the fourth quarter of 2011, which the company said was "primarily due to increases in customer driven categories."

The company's fourth-quarter return on average assets was 0.81%, improving from 0.74% the previous quarter and 0.63% a year earlier. The return on average equity was 7.36% in the fourth quarter, increasing from 6.67% in the third quarter and 5.51% in the fourth quarter of 2011.

CEO Ralph Babb said that "loan and fee income growth combined with expense control contributed to our 11 percent increase in net income, when compared to the third quarter," and that "in this slow growing national economy, we continue to benefit from our position in growth markets and industry expertise.'

Jefferies analyst Ken Usdin said in a note that Comerica "beat our estimate of $0.66 (ex. merger charges) on lower provision expense, better-than-expected purchase accounting accretion, and decent fee growth. The larger starting point for the balance sheet and the guide for flat provision [for credit losses] Y-Y should put an upward bias on '13 estimates."

From the stock's reaction on Wednesday, it would seem that investors also expect some upward earnings estimate revision for Comerica in the coming days.

Usdin rates Comerica a "Hold," with a $33 price target. The analyst estimates the company will grow its loan portfolio by 3.5% during 2013, although he noted that Comerica's management "expects reported net interest income to decline in '13."

Comerica's shares closed at $31.87 Tuesday, trading just below their reported Dec. 31 tangible book value of $33.38, and for 12 times the consensus 2013 EPS estimate of $2.65. The consensus 2014 EPS estimate is $2.74.

Based on a quarterly payout of 15 cents, the shares have a dividend yield of 1.88%. With the company repurchasing 10 million shares during 2012, Comerica said it returned 79% of net income to investors.

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

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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