Comerica (NYSE: CMA) topped quarterly expectations in its latest earnings report, but the bank delivered a couple of surprises that left investors feeling less confident about what lies ahead.
Wall Street is mostly focused on the negative, sending Comerica shares down about 12% as of noon ET.
Better, but not great
Bank stock investors have had a lot to digest so far in 2024. The Federal Reserve's push to fight inflation by raising interest rates has eaten into margins and forced banks to be on the defensive.
Comerica earned $1.49 per share in the second quarter, beating the consensus estimate of $1.19 per share. But net interest income -- the difference between what the bank collects on loans and pays out on deposits -- was down 14% year over year.
The bank said it expects that trend to continue in the quarters to come, adjusting its guidance for full-year net interest income to decline 14%. It had previously forecast an 11% drop.
Comerica also said it has not been selected to continue serving as the financial agent in support of the U.S. Treasury's Direct Express debit card program. The current contract is set to expire in 2025, and Comerica said it does not currently expect the transition to impact 2024 deposits or income.
Is Comerica stock a buy?
There is only so much a bank can do when conditions turn against it, and Comerica's management is arguably doing an admirable job navigating the current environment. But investors crave certainty, especially in areas like bank stocks, and little is certain about the quarters to come.
The Fed appears closer to a rate cut than it was just a few months ago, but that is in part because of growing questions about the health of the U.S. economy. Investors would be wise to stay on the sidelines for now while waiting for more clarity about where the economy (and rates) are headed.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
