Sandler O'Neill cuts Comerica profit estimates

R. Scott Siefers, a managing director, cut his 2008 profit estimate on the Dallas-based bank to $2.17 per share from $2.56 per share, and lowered his 12-month target price on the stock by $5 to $31.

Analysts polled by Thomson Financial, on average, estimate full-year earnings of $2.57 per share.

Siefers expects net charge-offs to be about 1 percent of average loans, versus a previous expectation of 0.81 percent. Additionally, Siefers expects the company to set aside $727 million for bad loans, $100 million more than he previously forecast.

"While our new NCO (net charge-off) assumptions are higher than management's expectation for 2008, they are consistent with our growing belief that the credit cycle will likely be deeper and more prolonged for virtually all players in the industry than had been contemplated in our estimates previously," Siefers wrote in his note to clients.

Aside from capital concerns, Siefers is also troubled by Comerica's large housing exposure in California and the potential for weakness in its significant Michigan franchise. He maintained a "Hold" rating on the stock.

Shares gained 49 cents to $28.98 in afternoon trading Wednesday, a general up day for financial stocks. Shares have traded between $27.13 and $61.34 in the past 12 months.