Comerica (CMA)

Financial services company Comerica (NYSE:CMA) fell short of the market’s revenue expectations in Q3 CY2025 as sales rose 3.3% year on year to $838 million. Its GAAP profit of $1.35 per share was 3.4% above analysts’ consensus estimates.

Company Overview

Founded in 1849 during the California Gold Rush era, Comerica (NYSE:CMA) is a financial services company that provides commercial banking, retail banking, and wealth management services to businesses and individuals.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Comerica's competitors include regional banks such as Fifth Third Bancorp (NASDAQ:FITB), KeyCorp (NYSE:KEY), and Huntington Bancshares (NASDAQ:HBAN), as well as larger national institutions like JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC).

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, Comerica grew its revenue at a tepid 2.3% compounded annual growth rate. This was below our standards and is a poor baseline for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Comerica’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 6.7% annually. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Comerica’s revenue grew by 3.3% year on year to $838 million, falling short of Wall Street’s estimates.

Net interest income made up 67.3% of the company’s total revenue during the last five years, meaning lending operations are Comerica’s largest source of revenue.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Comerica’s EPS grew at a solid 6.9% compounded annual growth rate over the last five years, higher than its 2.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Comerica, its two-year annual EPS declines of 22.9% mark a reversal from its (seemingly) healthy five-year trend. We hope Comerica can return to earnings growth in the future.

In Q3, Comerica reported EPS of $1.35, up from $1.32 in the same quarter last year. This print beat analysts’ estimates by 3.4%. Over the next 12 months, Wall Street expects Comerica’s full-year EPS of $5.24 to grow 4.8%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Comerica’s TBVPS was flat over the last five years. However, TBVPS growth has accelerated recently, growing by 29.6% annually over the last two years from $29.86 to $50.14 per share.

Over the next 12 months, Consensus estimates call for Comerica’s TBVPS to grow by 2.8% to $51.55, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Comerica has averaged a Tier 1 capital ratio of 11.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Comerica has averaged an ROE of 14.3%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for Comerica.

We enjoyed seeing Comerica beat analysts’ tangible book value per share expectations this quarter. We were also happy its net interest income narrowly outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed and its EPS slightly exceeded Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $73.26 immediately after reporting.

Updated: December 4, 2025 at 11:29 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies supporting the economy, but in the case of Comerica, we’ll be cheering from the sidelines. First off, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its solid ROE suggests it has grown profitably in the past, the downside is its net interest income growth was weak over the last five years. On top of that, its TBVPS growth was weak over the last five years.

Comerica’s P/B ratio based on the next 12 months is 1.5x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $81.33 on the company (compared to the current share price of $84.24), implying they don’t see much short-term potential in Comerica.