Comerica to Cut 300 jobs - Analyst Blog
August 30 2011 - 1:50PM
Zacks
Comerica Inc. (CMA) will be
laying off 300 positions at its Houston operations from October
this year, according to a report in the Business Journal that cited
a letter received by Texas Workforce Commission from the
company.
The job cuts, which will continue for the next six months, is a
part of the company’s initiatives to integrate Sterling Bancshares
Inc. – a company it acquired recently. The positions to be
eliminated are primarily those that are overlapping ones.
Notably, Comerica closed the acquisition of Sterling Bancshares
Inc. at the end of July. All the outstanding shares of Sterling’s
common stock were taken over by Comerica in a stock-for-stock
transaction. The acquired company would augment Comerica’s growth
in Texas with a solid deposit base and well located branch
network.
Per the agreement terms, Sterling shareholders received 0.2365
shares of Comerica’s common stock in exchange for each share of
Sterling’s common stock they owned. Further, fractional shares were
paid in cash.
The systems conversion is expected to be completed by the end of
this year. Until then, Sterling branches and ATMs will retain their
identity, while the branches will operate as a division of
Comerica.
The acquisition is a strategic fit for Comerica as it would
augment its Houston market share three-fold. Besides, it would
enable the company to foray into the attractive San Antonio and
Kerrville regions and add to Comerica's banking center network in
Dallas-Fort Worth. The transaction is expected to be at break-even
to Comerica's earnings in 2012 but be increasingly accretive
thereafter.
Our Take
The acquisition enhances Comerica’s growth opportunities with a
focus on middle market and small business. It leverages additional
marketing capacity to offer a wide array of products and services
through a larger distribution channel.
Such strategic expansion efforts bode well for Comerica and the
jobs cuts are part of the overall efficiency improvement. Capital
deployment efforts also inspire investors’ confidence in the stock.
Yet, its significant exposure to riskier areas such as commercial
real estate markets, lack of meaningful loan growth and regulatory
headwinds are the downsides.
Comerica currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. One of the closest peers of
Comerica, Fifth Third Bancorp
(FITB), also holds a Zacks #3 Rank.
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