Zacks_Analysts' Blog : CMA to Redeem $31.25M TRUPs - Analyst Blog

On Monday, Comerica Incorporated (CMA) announced that it would fully redeem about $31.25 million in trust preferred securities (TRUPs). These include redemption of 8.30% TRUPs issued by Sterling Bancshares Capital Trust III (SBIBN) at par coupled with accrued and unpaid distributions till the redemption date.

These callable securities will be redeemed on October 27, 2011. CMA will use the current cash available for redemption.

Earlier this month, Wells Fargo & Co. (WFC) announced that it would fully redeem about $5.78 billion worth TRUPs. These include $837.50 million of 7.85% TRUPs and $690.00 million of 8.625%. Wells Fargo will also redeem $2.50 billion of 7.7% instruments and $1.75 billion of 9.75% hybrid securities.

Similarly, in August, KeyCorp (KEY) announced that it would fully redeem about $361 million worth TRUPs issued by KeyCorp Capital V, KeyCorp Capital VI, KeyCorp Capital VIII and Union State Capital Trust I. These include 5.875% TRUPs, 6.125% TRUPs, 7% Enhanced TRUPs and 9.580% Capital Securities.

Moreover, in May, Fifth Third Bancorp (FITB) also issued a notice to the trustee of Fifth Third Capital Trust VII to redeem 8.875% TRUPs. The company stated that each Trust Preferred Security would be redeemed at a cash redemption price of $25.18.

The banks will be able to reduce interest costs by repaying TRUPs as these securities pay higher rates than other securities. According to Dodd-Frank Act, banks will be prevented from including these securities as regulatory capital from 2013.

Though CMA’s results are likely to be affected by volatile operating environment along with costs of maintaining Basel III norms, we expect the company’s business operations to continue to fuel its credit quality, capital position and liquidity.

CMA currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining our long-term Neutral recommendation on the stock.