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M&T Bank or Comerica: Which Bank Stock is a Better Pick?

Zacks Equity Research
Updated
Will Best Buy (BBY) Beat Estimates Again in Its Next Earnings Report?
Best Buy (BBY) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Benefits from a stabilizing economy and improving interest-rate scenario have well positioned the banking industry. Moreover, tax overhaul and an expected ease in regulation could bring more benefits.

The Zacks Major Regional Banks Industry has rallied 5.6% over the past six months, despite the not-so-impressive earnings results in the last two quarters of 2017. This compares with the S&P 500’s gain of 4.3% and 4.2% rally of the Financial Select Sector SPDR fund (XLF), a top bank ETF, over this period.

Therefore, we are focusing on two major banks, M&T Bank MTB and Comerica CMA.

M&T Bank, with a market cap of $25.4 billion, offers a wide range of retail and commercial banking services with 780 banking offices in the United States, a commercial banking office in Canada, and an office in the Cayman Islands. On the other hand, Comerica provides various financial products and services in Texas, California, Michigan, Arizona, Florida, Canada and Mexico, and has a market cap of $14.6 billion.

Both M&T Bank and Comerica carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Though both banks have similar business trends, deeper research into the financials will help decide which investment option is better.

Price Performance

Both banks have outperformed the industry (down 2.7%) year to date and gained decently. While shares of Comerica have rallied 8.1%, M&T Bank has recorded growth of 5.2%. So, Comerica performed better than M&T Bank.



Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-month period is 10.12% for M&T Bank and 10.94% for Comerica as compared with the industry’s level of 10.68%. Therefore, Comerica reinvests its earnings more efficiently.

Earnings Estimate Revisions & Growth Projections

The Zacks Consensus Estimate for 2018 earnings of M&T Bank has increased slightly over the last 30 days. On the other hand, the same for Comerica inched up nearly 1% for this year, over the same time frame.

Moreover, current-year earnings for M&T Bank are projected to jump 30.7% year over year. For Comerica, the Zacks Consensus Estimate is pegged at $6.37 for 2018, reflecting a year-over-year increase of 34.4%.

Hence, Comerica reflects better earnings growth prospects.

Sales Growth

Sales for M&T Bank for the current year are projected to move up 3.4% year over year to $5.8 billion. For Comerica, the Zacks Consensus Estimate is pegged at $3.4 billion for 2018, reflecting year-over-year growth of 6.2%.

Therefore, Comerica has an edge here as well.

Dividend Yield

Both companies have been deploying capital in terms of dividend payments to enhance shareholder value. Comerica has a current dividend yield of 1.28%, while M&T Bank has a dividend yield of 1.67%.

Although both the stocks’ dividend yield is lower than the industry’s average of 2%, shareholders of M&T Bank gain more.



Leverage Ratio

Both M&T Bank and Comerica have lower debt-to-equity ratio compared with the industry average of 0.91. However, M&T Bank, with a ratio of 0.54, has an edge over Comerica with a ratio of 0.58.

Conclusion

Our comparative analysis shows that Comerica is better positioned than M&T Bank when considering price performance and ROE, along with earnings and sales growth expectations. M&T Bank wins on dividend yield and leverage ratio.

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Comerica Incorporated (CMA) : Free Stock Analysis Report
 
M&T Bank Corporation (MTB) : Free Stock Analysis Report
 
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Zacks Investment Research