On Tuesday, Goldman Sachs (NYSE:GS) analysts adjusted their stance on Comerica Incorporated (NYSE:CMA), downgrading the bank's stock from "Buy" to "Neutral" and setting a price target of $71.00. The revised target suggests a potential 13% upside from the stock's current price level.
The downgrade comes as analysts foresee a slower relative improvement in Comerica's operating metrics compared to its peers in a normalizing economic environment. According to Goldman Sachs, the key factors influencing Comerica's fundamental progress are a mix of positive and negative elements.
On the positive side, net interest income (NII) is expected to benefit from the Bloomberg Short-Term Bank Yield Index (BSBY), securities repricing, and a resurgence in loan growth by 2025. However, on the downside, demand deposit accounts (DDA) could pose a headwind in a slower rate-cutting cycle, potentially weighing on NII. Additionally, the analysts project continued expense pressures related to core growth and pension obligations.
The pace of capital return is also anticipated to be inconsistent in the upcoming quarters due to fluctuations in long-term rates. Although earnings uplift and efficiency improvements are expected at Comerica, the timeline for these improvements may lag behind that of its competitors.
Goldman Sachs' assessment reflects a view that Comerica's current share price, at $62.00, which equates to 11.5 times the projected 2025 consensus earnings, already captures the bank's medium-term earnings capacity. Consequently, the analysts see less relative upside for Comerica's shares compared to those of its peers.
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