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Expectations High for Comerica

Stocks in this article: CMA CBSH OZRK WFC BAC F

I don't believe Comerica's 2013 net interest margin output was ever as bad as some analysts made it out to be. While I agree there were reasons to be disappointed with the bank's performance in net interest income, it was nonetheless comparable to larger rivals like Bank of America (BAC). It also significantly outperformed Commerce Bancshares.

All told, while management has done well figuring out ways to beat its net interest income estimates, this is still one area where management will need to improve if these shares are to continue their ascent. If management is able to close the year out on a strong note with a "decent" rise in overall loan growth, I believe Comerica will embark on a clear path to exploit opportunities with higher rates.

The other reason is that unlike Citigroup or Wells Fargo (which Comerica has exceeded in overall loan growth), Comerica can boast about roughly 80% of its loan bookings being at variable rates. This is exceptional leverage. And I believe it's only a matter of time before these rates inch higher, which should deliver more profits to Comerica's bottom line.

With the better-than-expected results we've seen from Ford (F) and General Motors (GM), it doesn't appear as if the expected slowdown in U.S. auto sales is going to materialize. In fact, growth has picked up a bit in Europe and China. Given that Comerica has almost 10% of its loan booking to auto dealers, that part of its business should continue to trend higher.

All things considered, Comerica remains a top-notch bank with a growing presence in large markets like California and Texas. In many respects, the premium these shares carry relative to its peers presumes this fact. While I normally wouldn't encourage buying stocks at their 52-week highs, it's hard to not like Comerica's prospects given the expected improvements in U.S. interest rates.

At the time of publication, the author held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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