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By Scott Kanowsky
Investing.com — Analysts at Citi have placed Comerica Inc (NYSE:) on its focus list, arguing that the Dallas-based lender’s valuation presents a “compelling opportunity” despite a recent slip in stocks across the banking sector.
In a note to clients, the Citi analysts said Comerica was among the “best regional bank plays” thanks to its ability to potentially benefit from higher short-term interest rates and improved commercial loan growth.
They added that Comerica’s 12% implied cost of equity – a measure of the compensation investors demand from the bank – represents an “attractive time” to buy shares in the group.
“We have found over time that the stocks trade between 9.5-10.5% during mid-cycle, which then increases to 10.5-12% during late cycle and surpasses 12% in bear markets,” the Citi analysts noted.
The comments come as banking stocks have come under pressure this week after startups-focused SVB Financial Group (NASDAQ:) embarked on a $1.75 billion share sale in a bid to shore up its finances.
The Citi analysts said the primary concerns for lenders are related to funding pressures, while credit risk worries also “lurk in the background.” However, they said that the “recent pull back has created an opportunity,” and “investors should start looking to add to positions here as risk/reward looks very attractive.”
Shares in Comerica slumped on Friday, extending declines seen in the previous session.
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