The Federal Reserve has kept its short-term federal funds rate in a range of between zero and 0.25% since late 2008. The central bank has also been expanding its balance sheet in an effort to hold long-term rates at historically low levels. Comerica has already enjoyed most of the benefit on the low rates on the cost side, but its assets continue to reprice at lower rates.
The rising yield for 10-year U.S. Treasuries over the past three months has provided some hope for the margin. But Comerica provided guidance for 2013, saying that it expected its net interest income to continue declining this year, with a further narrowing of the margin partially offset by loan growth.
Stifel Nicolaus analyst Christopher Mutascio -- who has since been transferred to KBW's analyst team, after Stifel completed its acquisition of KBW on Feb. 15 -- downgraded Comerica to a "sell" rating from a "buy" rating on Feb. 11. The analyst said in a report that Comerica's stock was "trading at a 25% premium to the rest of our large-cap bank coverage universe despite having one of the lowest projected [returns on average assets (ROA)]" for 2014.
The analyst added that "with approximately 72% of the company's earning assets tied to the short-end of the yield curve (not the long end), we believe the market is way ahead of itself in assuming just how much the company benefits from the recent rise in long-term interest rates."
Comerica's 2012 ROA (Return on Assets) was 0.81%. Mutascio estimates that Comerica's 2014 ROA will be 0.75%, with EPS of $2.85.
Interested in more on Comerica? See TheStreet Ratings' report card for this stock.
-- Written by Philip van Doorn in Jupiter, Fla.