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TARP dividends weighed on Comerica's CMA first-quarter earnings. The $33 million payout pushed net income to the red, and the bank posted a $24 million net loss compared with net income of $3 million in the fourth quarter. The results are within our estimates, and we are leaving Comerica's fair value unchanged.
With regard to Comerica's capital position we have no big worries. We think tangible common equity at 7.3% of tangible assets is enough for the bank to absorb its expected losses. During the call, management expressed its intent to repay the $2.25 billion it received from the TARP when it considered doing so feasible. However, we think there are more loan losses on the way for Comerica that will pressure profitability for some quarters, preventing the company from building up its capital quickly. Hence, to repay the government, the bank would probably have to raise some dilutive equity. On the other hand, it can opt to retain its TARP funds, in which case common shareholders will continue to bear the burden of the preferred dividend.