Comerica (CMA, $71.32) stock gets a rating downgrade & price target cut by Goldman Sachs

Shares of financial Services company Comerica got downgraded by Goldman Sachs.

Goldman analysts lowered their rating on the stock to sell from neutral. They also slashed their price target on the shares to $70 from $86.

Analyst Ryan Nash cautioned clients in a note that the Federal Reserve’s interest rate cuts could offset Comerica’s commendable actions at boosting loan growth, controlling costs and returning capital. Nash pointed out that Comerica’s  disclosures indicate that its NII (net interest income) will decline by 12% from a 200bp decrease in rates (100bp average) compared to its peers' disclosures at a lower 5%. Nash further added that while Comerica has invested in $2.8 billion of swaps to hedge the interest rate risks, his team estimates that the company would need an additional $20 billion-$24 billion to be sufficiently hedged.

According to Nash, several expense advantages in 2019 that helped Comerica to keep costs flat are unlikely to repeat (FDIC costs, GEAR up savings). He also noted that most of its excess capital has been used up.