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On Jun 24, we reiterated our recommendation on the retail and wholesale banking products and services provider, TCF Financial Corporation (TCB - Analyst Report) at Neutral based on its superior position in the market aided by its positive approach to market conditions and decreasing expenses. Moreover, a healthy capital position is indicative of the company’s robust standing. However, the regulatory reforms and unsettled global economy might act as deterrents for the stock.

Why the Neutral Stance?

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 years, the company enhanced shareholder value by returning over $90 million through dividends, thereby enhancing investors’ confidence.

With the growing level of deposits, TCF Financial has expanded organically. The first quarter of 2013 reflects the 10th consecutive quarter of positive deposits growth. A huge deposits base should help the company generate loans and meet other general business purposes.

Lower average cost of borrowings owing to the company’s balance sheet repositioning completed in Mar 2012 led to a significant improvement in net interest margin (NIM). NIM improved 58 basis points year over year to 4.72% in first-quarter 2013.

However, in the first quarter of 2013, TCF Financial was marginally below the Zacks Consensus Estimate, impacted by a dip in total revenue driven by reduced interest as well non-interest income.

Over the last 60 days, the Zacks Consensus Estimate for 2013 has gone down by a penny to 88 cents, while it remained stable at $1.13 per share for 2014. Hence, TCF Financial carries a Zacks Rank #4 (Sell).

Other Stocks to Consider

Some stocks in the same sector that are currently performing well include Tower Financial Corporation , First Interstate Bancsystem Inc. (FIBK - Snapshot Report) and Old Second Bancorp Inc. (OSBC - Snapshot Report). All 3 companies carry a Zacks Rank #1 (Strong Buy).

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