Zacks_Analysts' Blog : Comerica to Redeem $24M TruPS - Analyst Blog

Comerica Incorporated (CMA) has announced to fully redeem about $24 million in trust preferred securities (TruPS). These include redemption of floating rate TruPS of $20 million, issued by Sterling Bancshares Statutory Trust One and $4 million of TruPS issued by BOTH Capital Trust I.

Comerica stated that both these TruPS will be redeemed at par, coupled with accrued and unpaid distributions until the redemption date. The company further stated that Sterling Bancshares Statutory Trust One I TruPS will be redeemed on December 31, 2011 while BOTH Capital Trust I will be redeemed on January 7, 2012. The company has mentioned that it will use existing available cash to fund the redemptions.

Last month, Comerica had fully redeemed about $31.25 million in TruPS. These included redemption of 8.30% TruPS issued by Sterling Bancshares Capital Trust III (SBIBN) at par, coupled with accrued and unpaid distributions until the redemption date.

Estimate Revision Trends

Over the last 30 days, 15 out of the 23 analysts covering Comerica have lowered their estimates for the fourth quarter, while 3 of them moved north. Moreover, for fiscal 2011, 12 out of the 24 analysts have trimmed their estimates, while 7 upward revisions were witnessed over the last 30 days.

Currently, the Zacks Consensus Estimate for the fourth quarter is operating earnings of 49 cents per share, down 7.96% from the prior-year quarter.

Our Take

It can be assumed that Comerica will be able to reduce interest costs by redeeming TruPS as these securities demand higher rates than other securities. According to Dodd-Frank Act, from 2013, banks will no longer be able to include these securities as regulatory capital.

Comerica currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, one of the peers of the company, M&T Bank Corp. (MTB) retains a Zacks #3 Rank.