On Sep 19, we reiterated our recommendation on retail and
wholesale banking products and services provider,
TCF Financial Corporation
) at Neutral based on its superior market position aided by its
positive approach to market conditions and top-line growth.
Moreover, a healthy capital position is indicative of the
company's robust standing. However, regulatory reforms and an
unsettled global economy might act as headwinds for the stock.
TCF Financial reported second-quarter 2013 net income of 21 cents
per share, in line with the Zacks Consensus Estimate. However,
results improved by a nickel on a sequential basis. Deposits
growth coupled with improving credit quality were the tailwinds
for the quarter. However, increase in non-interest expenses
reflects undisciplined expense management.
We view TCF Financial as a sound asset for yield-seeking
investors. The company has been able to generate positive cash
flow even in an increasingly difficult operating environment.
Moreover, over the last three and a half years ended Jun 30,
2013, the company enhanced shareholder value by returning over
$100 million through dividends, thereby enhancing investors'
With the growing level of deposits, TCF Financial has expanded
organically. The second quarter of 2013 reflects the 11th
consecutive quarter of positive deposits growth. A huge deposit
base should help the company generate loans and meet other
general business purposes.
An upward trend in profitability metrics safeguards the company's
financials. The return on average assets and common equity was
0.80% and 7.39%, respectively, in first-half 2013 as compared
with negative 2.71% and negative 29.84%, respectively, in the
comparable prior-year period.
However, with the growing level of non-interest expenses, the
company is exposed to operational risks. Though non-interest
expenses declined 56.6% year over year in first-half 2013, over
the last 5 years, expenses recorded a CAGR of 15.8% in 2012.
Over the last 60 days, the Zacks Consensus Estimate for 2013 has
gone down by 2.3% to 85 cents, while it remained stable at $1.12
per share for 2014. Hence, TCF Financial carries a Zacks Rank #4
Other Stocks to Consider
Some stocks in the same sector that are currently performing well
Tower Financial Corporation
German American Bancorp Inc.
). All three companies carry a Zacks Rank #1 (Strong Buy).
FIRSTBANK ALMA (FBMI): Free Stock Analysis
GERMAN AMER BCP (GABC): Free Stock Analysis
TCF FINL CORP (TCB): Free Stock Analysis
TOWER FINANCIAL (TOFC): Free Stock Analysis
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