Comerica's (NYSE:CMA) Acquisition of Sterling (Nasdaq:SBIB) Dilutive in Short Term

The acquisition of Sterling (Nasdaq:SBIB) by Comerica (NYSE:CMA) is considered by FBR as being too pricey in regard to where peers are currently trading, and see the deal being dilutive to Comerica over the next couple of years.

FBR says, "Comerica is acquiring Sterling (Nasdaq:SBIB) for $10 a share or 2.3x tangible book value (TBV) of $4.31. Although we understand the strategic motivation surrounding the acquisition, we believe the price paid for SBIB was quite rich compared to where peers are trading currently. We estimate that the transaction will not be accretive to earnings until 2013 at the earliest; until then, we expect the acquisition to be approximately $0.30 dilutive to normalized earnings of $3.70. Given the up-front dilution, execution risks, and uncertainty around the deal, we hesitate to recommend shares until we get more clarity into the true economic value of the acquisition.

"We are increasing our FY11E operating EPS to $1.85 from $1.60 to reflect a lower provision expense and higher fee income. We are also introducing our FY12E operating EPS of $2.50 and GAAP EPS of $2.39."

FBR Capital reiterates a "Market Perform" rating on Comerica, which was trading at $38.45, down $0.29, or 0.75 percent, as of 11:03 AM EST. FBR has a price target of $41 on them.