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TCF Financial (TCB) Going Digital -- Should You Hold?

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On Jun 28, we issued an updated research report on TCF Financial Corporation . This Minnesota-based various retail and commercial banking products and services provider’s growth has been aided by steady improvement in deposits, enhanced capital deployment activities and balance sheet streamlining.

TCF Financial is getting digitized as per customers’ requirements. The company is all set to shut down 33 retail branches located inside Jewel-Osco grocery stores in Chicago and substitute those with advanced ATMs. The new agreement comes in line with TCF Financial’s strategy to strengthen its presence in the Chicago region. Apart from branch closure and increasing ATM locations, the agreement also calls for enhancement of retail branches and digital platforms to offer better customer service.

TCF Financial’s improving deposits continue to complement its organic growth potential. The company has been able to sustain growth in its deposit balances over the past few years. Total deposits have grown at a 5-year CAGR of 8.2% (2010-2015), with similar growth witnessed during the first quarter of 2016 as well.

Moreover, the company’s credit quality has shown improvement in the last 6 quarters. Notably, normal provisions, excluding TDR sale and added reserves, have either declined or remained stable in the preceding 6 quarters. Also, the ratio of non-performing assets, as a percentage of loans & leases and Other Real Estate Loans, has dropped consistently over the same time frame.

However, margin pressure, consistently declining fee income remains major headwinds for TCF Financial. Besides this mounting expenses and strict regulatory reforms are likely to be a strain on profitability.

For 2016 and 2017, the Zacks Consensus Estimate remained stable at $1.15 and $1.27 per share, respectively, over the last 30 days. TCF Financial currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some finance stocks worth considering include Park Sterling Corporation , Community Trust Bancorp Inc. (CTBI - Free Report) and Pinnacle Financial Partners Inc. (PNFP - Free Report) . All the three companies hold a Zacks Rank #2 (Buy).

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