This Bank Is Being Targeted By Sellers Because Of Its Deposit Mix, Plus Citi Says It's A Good Buy

Several solid stocks that may bounce back have been hit by the fear of further bank woes, including Comerica.

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Following the collapse of Silicon Valley Bank on Friday, this regional bank stock fell over 27% on Monday but rebounded on Tuesday as a result of the pressure that followed the collapse of that institution.

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As Citi analyst Keith Horowitz stated in a note to clients on Tuesday, the stock of Comerica could experience a substantial rebound as a result of the company's strong performance during the period under review.

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“Currently, the implied COE for banks is 12.9%, which we believe represents very good value in our opinion, and we remain to Buy rated on the CMA, one of the stocks with the most upside expected,” Horowitz wrote. As of Monday, the stock closed below $42 per share, which is below the price target of $90 per share that he has set for it.

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Horowitz believes that the bank was likely sold by a number of investors due to the large percentage of deposits that were uninsured in the bank. It is much higher than the average bank, but it is well below the levels at SVB and the failed Signature Bank, which are well above average.

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Investing in Comerica may be an indication that the company is tilted to commercial clients, Horowitz said, which was also the case at Signature Bank and SVB in terms of the number of uninsured deposits.

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The bank, however, had an average balance of less than half of the number of deposits over the $250,000 insurance threshold, which is less than half of SVB's balance. Theoretically, that would make Comerica less prone to a bank run, which could make it more resilient to them.

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Furthermore, Horowitz said he disagreed with the logic of a move made by Moody's Investor Service to review the potential downgrade of Comerica's debt in the wake of yesterday's announcement.

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“We would also like to point out that CMA has a capital ratio of 10% [Common Equity Tier 1 Capital] which is the highest of all the regional banks in our universe and does not seem to be taken into consideration by Moody's,” Horowitz said.

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On Tuesday, the rating service downgraded the entire U.S. banking sector.

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