Comerica: Jobs Report Winner (Update 5)
Updated with market close information, the dismissal of Allstate's $700 million mortgage lawsuit against Bank of America, and the retirement of Bank of America president of home loans, Barbara Desoer.
.
NEW YORK (
) --
Comerica
(CMA) - Get Report
was the winner among the largest banking names on Friday, with shares rising more than 6% to close at $30.08.
The entire market was lifted by a strong jobs report from the U.S. Labor Department, with total nonfarm payroll employment rising by 243,000 during January, with the unemployment rate declining to 8.3% from 8.5%. Government employment levels "changed little," while "job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing."
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The number of jobs added in December was revised upward to 203,000 from 200,000, while November's job growth figure was raised sharply to 157,000 from 100,000.
The
The KBW Bank Index
(I:BKX)
rose over over 3% to close at 45.05.
Comerica is headquartered in Dallas, but still has a major presence in Michigan, which is benefiting from the auto manufacturing industry's recovery.
The company's chief economist Robert Dye said on Thursday that "recent stronger-than-expected U.S. economic data is good news for U.S. auto sales and that is good news for Michigan," adding that "total consumer debt as a percentage of income is very low right now, so there is ample room for many households to take on a new car payment once they feel more secure in their job prospects and more secure about the U.S. economy as a whole."
Dye added that "regional labor markets in Michigan remain patchy, but overall, unemployment rates are trending down. Soft house prices are still a problem for Michigan, as well as for most other states."
Please see
TheStreet's
for more information on Comerica's strong loan growth during the fourth quarter.
Comerica's shares have now risen 17% year-to-date, and the shares just below tangible book value according to HighlineFI, and for 13 times the consensus 2012 earnings estimate of $2.30 a share, among analysts polled by Thomson Reuters.
Interested in more on Comerica? See TheStreet Ratings' report card for this stock.
The continued jobs growth in the United States points the way to a possible long-term windfall for
Bank of America
(BAC) - Get Report
and its investors.
Bank of America's shares rose more than 5% on Friday, to close at $7.84.
The shares have now returned 41% year-to-date, despite a slew of earnings estimate cuts, following the company's continued efforts to shore up its regulatory capital by shedding assets, including profitable foreign credit card operations.
The shares sank 58% during 2011, mainly from the legacy mortgage putback risk, from the company's purchase of Countrywide Financial in 2008.
The continued improvement in the national jobs numbers can only help Bank of America, which "ended 2011 with $15.9 billion reserved to address potential representations and warranties mortgage repurchase claims."
With numerous mortgage putback claims -- including
a very large one from the Federal Housing Finance Agency
-- that could take years to be settled or work through the courts, as well as an
imminent settlement between the largest U.S. mortgage servicers
, nobody knows what Bank of America's total mortgage putback expenses will be, but it's just possible that continued jobs growth can lower the company's liability, allowing it to recapture some of that $15.9 billion as earnings and capital.
In what could be a very significant court decision, pointing the way to less overhang from the Countrywide acquisition,
Bloomberg
reported on Friday that U.S. District Judge Mariana Pfaelzer in Los Angeles threw out
Allstate's
(ALL) - Get Report
lawsuit against Bank of America over $700 million in mortgage-backed securities originally purchased from Countrywide.
The judge found that Allstate hadn't provided sufficient evidence that BAC had committed fraud by structuring the Countrywide acquisition so that nothing was left for Countrywide's creditors.
The tossing of the Allstate suit was a nice parting gift for Bank of America president of home loans Barbara Desoer,
who will retire from the company this month
. Desoer has worked for Bank of America since 1977, and has filled various senior roles with the company.
Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.
Shares of
Capital One
(COF) - Get Report
were up nearly 5% to close at $49.29.
The prospect of a sustained recovery in U.S. employment heading into Capital One's pending acquisitions of
ING Direct (USA)
, which is expected to be completed during the first quarter, followed by the purchase of
HSBC's
(HBC)
U.S. credit card portfolio which is expected to be completed during the second quarter, could alleviate investor concerns about integration risk and an expected common equity raise of between $750 million and $1.25 billion.
Capital One's shares trade for 1.4 times tangible book value as of Thursday's close, according to HighlineFI, and for 8.5 times the consensus 2012 earnings estimate of $6.06, among analysts polled by Thomson Reuters.
The price ratios still represent a discounted valuation for a company that has achieved a return on average assets (ROA) ranging between 1.42% and 2.08%, over the past five quarters.
Interested in more on Capital One Financial? See TheStreet Ratings' report card for this stock.
Strong manufacturing jobs growth is also of major importance to other Midwest players, inckluding
Huntington Bancshares
(HBAN) - Get Report
of Columbus, Ohio.
Huntington's shares rose 2% to close at $5.90.
CEO Stephen Steinour said on Monday in a speech at the Detroit Economic Club that the Midwest was "leading the national economic recovery," with the jobless rate in Michigan "improving faster than any other state," and the Midwest economy "doing better relative to the nation than it did in the past."
Large Midwest business investment that would lead to employment growth cited by Stenour included a new Hyundai "hot-cold testing facility at its American Technical Center in Washtenaw County," a new Honda plant in Ohio to manufacture Acura models, and the consideration of sites in Ohio by
Royal Dutch Shell PLC
(RDS.A)
for "to process the oil and gas from the Marcellus and Utica shale deposits."
Please see
TheStreet's
for detailed information on Huntington's fourth-quarter numbers, which included very strong loan growth, as well as increases in coveted noninterest-bearing deposits.
Interested in more on Huntington Bancshares? See TheStreet Ratings' report card for this stock.
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--
Written by Philip van Doorn in Jupiter, Fla.
To contact the writer, click here:
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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.
