Asset Sensitivity And Cost Restructuring Have Brought Comerica's Groove Back

Comerica (CMA) is something of an odd duck in its pond. Big enough to have to go through the CCAR process and operating across an extended geographic footprint, CMA is nevertheless quite a bit smaller than the likes of U.S. Bancorp (USB), PNC Financial (PNC), BB&T (BBT), and Fifth Third (FITB). It’s also uncommonly asset-sensitive and committed to business lending – residential mortgages and consumer loans make up less than 10% of the loan book – but has long struggled to achieve attractive operating leverage.

Odd isn’t always a bad thing, though, and Comerica is reaping the benefits of higher rates and a thorough restructuring effort. If U.S. growth can accelerate from here, driving better commercial loan demand, Comerica could really enjoy a run of strong earnings growth. That said, the share have shot up more than 50% in the last year, and more than 75% in the last three years, and it is difficult to see much undervaluation unless you factor in some combination of higher-than-expected rates, 3%-plus U.S. GDP growth, less regulation, and/or meaningfully lower corporate taxes.

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Asset Sensitivity And Cost Restructuring Have Brought Comerica's Groove Back