Comerica: Financial Winner

NEW YORK ( TheStreet) -- Comerica ( CMA) was the winner among the largest U.S. financial names on Tuesday, with shares rising 4% to close at $31.95.

The major U.S. equity indices all saw gains of at least 1.5%, after a successful 3.2 billion euro short-term bond sale by Spain calmed European fears. Spain saw very strong demand for the paper, having originally set a maximum target for the auction of 3 billion euro. Despite the strong demand, the average yield on one-year Spanish treasury bills rose to 2.623%, from 1.418% last month and the yield on 18-month bills popped up to 3.11% from 1.711% last month.

Spain will hold another bond auction on Thursday.

The KBW Bank Index ( I:BKX) rose 2% to close at 48.49.

Investors were enthusiastic about Comerica's first-quarter results, with the Dallas lender reporting net income of $130 million, or 66 cents a share, increasing from $96 million, or 48 cents a share, during the fourth quarter, and $103 million, or 57 cents a share, during the first quarter of 2011. The fourth-quarter results included $37 million in restructuring charges associated with the purchase of Sterling Bancshares last July.

Analysts polled by Thomson Reuters had estimated first-quarter earnings of 55 cents a share.

Jefferies analyst Ken Usdin said that Comerica's results looked "pretty solid as better fees and stable net interest income drove a 4% Q-Q increase in core pre-provision income," and that "credit quality exceeded expectations, and the better 2012 outlook for provision expense should provide a lift to estimates this year."

Comerica reported total growth in average loans of 2% during the first quarter, with average commercial loan balances increasing 5% from the fourth quarter. Usdin said that "despite the better-than-expected loan growth, management left its FY2012 loan growth outlook unchanged, calling for 2%-5% average growth," and that since "loans ended the quarter at $43.0B (or 7% above the FY11 average), guidance looks very conservative."

Usdin has a hold rating on Comerica with a $31 price target.

Comerica's shares have now returned 24% year-to-date, following a 38% decline during 2011.

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The shares trade for just below their reported March 31 tangible book value of $32.06, and for 12 times the consensus 2013 EPS estimate of $2.65.

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

Shares of Citigroup ( C) rose 3% to close at $35.08. The shares have now returned 33% year-to-date, following a 58% decline last year.

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Citi now trades for 0.7 times the company's reported March 31 tangible book value of $50.90 a share, and for a relatively low seven times the consensus 2013 EPS estimate of $4.70. The consensus 2012 EPS estimate is $4.16.

Several analysts on Tuesday raised their earnings estimates and price targets for Citigroup, with many pointing out that Citi Holdings -- the repository for assets being wound down as part of CEO Vikram Pandit's good bank/bad bank strategy -- was placing a drag on earnings, and on the share price.

Oppenheimer analyst Chris Kotowski rates Citigroup at outperform, and on Tuesday went against the trend, and lowered his price target for the shares to $50 from $52, "based on a lower market multiple," of 10.5 times his 2012 EPS estimate of $4.74.

Kotowski said that "the ongoing business" of Citicorp -- Citigroup's main subsidiary -- earned a return on equity of "about 15%, which obviously would deserve a much higher multiple than what the shares are currently being awarded."

The analyst said that "Citi continues to be our favorite stock in the group. The shares are trading at just 67% of tangible book value, and for all the legitimately troubled assets in Citi Holdings, these are winding down and the healthy franchises in Citicorp should become more fully valued."

Later in the day, Citi's shareholders failed to approve an advisory vote on the company's 2011 executive compensation plan, which included total compensation of $14.9 million for CEO Vikram Pandit.

According to a Reuters report, outgoing Citigroup chairman Richard Parsons called the failure of the "say on pay" vote -- required under the Dodd-Frank banking reform legislation -- was "a serious matter," and said that members of Citi's board of directors would meet with shareholder representatives to discuss investors' objections to the compensation plan.

Interested in more on Citigroup? 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: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

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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