Comerica (CMA)

Financial services company Comerica (NYSE:CMA) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 3.3% year on year to $850 million. Its non-GAAP profit of $1.46 per share was 17% 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).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Comerica grew its revenue at a sluggish 2.7% compounded annual growth rate. This was below our standards and is a tough starting point 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 4.9% 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 reported modest year-on-year revenue growth of 3.3% but beat Wall Street’s estimates by 0.8%.

Net interest income made up 67.1% of the company’s total revenue during the last five years, meaning lending operations are Comerica’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, Comerica’s efficiency ratio has increased by 10.3 percentage points, going from 61.8% to 69.4%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Comerica’s efficiency ratio came in at 72.3% this quarter, falling short of analysts’ expectations by 193.3 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Comerica to maintain its trailing one-year ratio with a projection of 69.3%.

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 decent 10.9% compounded annual growth rate over the last five years, higher than its 2.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Comerica, its two-year annual EPS declines of 15.6% mark a reversal from its five-year trend. We hope Comerica can return to earnings growth in the future.

In Q4, Comerica reported adjusted EPS of $1.46, up from $1.20 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Comerica’s full-year EPS of $5.49 to shrink by 2.4%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. 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 14.3% annually over the last two years from $39.90 to $52.16 per share.

Over the next 12 months, Consensus estimates call for Comerica’s TBVPS to grow by 2.9% to $53.66, lousy 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 11.9%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Comerica has averaged an ROE of 14.1%, impressive 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.

It was good to see Comerica beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 2.7% to $94.08 immediately following the results.

Updated: January 20, 2026 at 11:51 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Comerica.

We cheer for all companies supporting the economy, but in the case of Comerica, we’ll be cheering from the sidelines. For starters, its revenue growth was weak over the last five years. And while its solid ROE suggests it has grown profitably in the past, the downside is its estimated sales for the next 12 months are weak. On top of that, its net interest income 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 $88.75 on the company (compared to the current share price of $93.32), implying they don’t see much short-term potential in Comerica.