Analysts at Citigroup Inc (NYSE:C) have placed Dallas-based financial services firm Comerica (NYSE:CMA) Inc on its widely watched focus list.
In a note to client, Citi said the company, which has a wholly owned subsidiary called Comerica (NYSE:CMA) Bank, presents a "compelling opportunity" despite a recent slip in stocks across the banking sector.
Citi said Comerica is one of the "best regional bank plays" thanks to its ability to potentially benefit from higher short-term interest rates and improved commercial loan growth.
The analysts believe that Comerica's 12% implied cost of equity 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 the late cycle and surpasses 12% in bear markets," the Citi analysts noted.
In addition, Citi noted that the recent pull-back in banking industry stocks has created an opportunity, and "investors should start looking to add to positions here as risk/reward looks very attractive."
The stock market’s sharpest drops on Friday were again coming from the banking and financial industry, where stocks tanked for a second day.
SVB Financial, which ran Silicon Valley Bank and served the industry surrounding startup companies, plunged over 60% this week as it raised cash to relieve a crunch. It is in a relatively unique situation, but it’s still triggered concerns a broader banking crisis could erupt.
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