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Shares of TCF Financial Corporation climbed 1.87% in single-day trading following the second-quarter 2018 earnings release on Jul 27, before the market opened. The company reported adjusted earnings per share of 49 cents, beating the Zacks Consensus Estimate of 47 cents. Further, the figure compares favorably with the prior-year quarter figure of 33 cents.
The company witnessed top-line strength in the reported quarter. Furthermore, margin pressure seems to be easing. The quarter also witnessed continued rise in loans and deposits, while maintaining a solid capital position and lower provisions. However, elevated expenses were on the downside.
Including non-recurring items of 15 cents per share, the company reported net income of $58.7 million or 34 cents compared with $60.4 million or 33 cents recorded in the year-ago quarter.
Revenues Improve, Cost Pressure Persists
Total revenues came in at $364.9 million in the quarter, up 6.8% year over year. Moreover, the top line comfortably surpassed the Zacks Consensus Estimate of $363 million.
Net interest income (NII) was up nearly 10.4% year over year to $250.8 million. This rise was mainly attributable to increased interest income on loans and leases held for investment, along with and debt securities available for sale, partially mitigated by rise in total interest expense.
NIM of 4.67% expanded 15 basis points (bps) year over year due to elevated average yields on the variable and adjustable-rate loan portfolios on rising rates, partly offset by escalated cost of funds.
Non-interest income came in at $114.1 million, slightly down on a year-over-year basis. Elevated card revenues were offset by lower fees and other revenues.
TCF Financial reported non-interest expenses of $272 million, up 16.7% from the year-earlier quarter. Rise in almost all components of expenses led to the upsurge.
As of Jun 30, 2018, average deposits improved 6% year over year to $18.4 billion. Average loans and leases climbed 4.2% year over year to $19.1 billion in the June-end quarter.
Credit Quality Improves
Credit quality for TCF Financial marked significant improvement. Non-accrual loans and leases, and other real estate owned slipped 36% year over year to $101.1 million.
Further, provisions for credit losses were $14.2 million, down 26.8% year over year, primarily due to the auto finance portfolio run-off, partly mitigated by rise in provisions in the inventory finance portfolio.
In addition, net charge-offs, as a percentage of average loans and leases, contracted 1 bp year over year to 0.27%. The downside chiefly resulted from lower net charge-offs in the commercial portfolio, partly offset by elevated net charge-offs in the auto finance and leasing and equipment finance portfolios.
Robust Capital Position
TCF Financial’s capital ratios remained strong. As of Jun 30, 2018, Common equity Tier 1 capital ratio was 10.60% compared with 10.24% as of Jun 30, 2017. Total risk-based capital ratio was 13.22% compared with 13.49% as of Jun 30, 2017. Tier 1 leverage capital ratio was 10.31%, down from 10.76% as of Jun 30, 2017.
During the quarter under review, the company repurchased 2.8 million shares of its common stock for a total cost of $68.2 million.
Our Viewpoint
TCF Financial delivered an impressive performance in the April-June quarter. Continued top-line improvement underscores the company’s sturdy standing in the market. At the same time, a strengthening capital position and improving credit quality are anticipated to favor the company’s near-term growth. In addition to this, we believe its efforts to reduce balance-sheet risks and diversify the loan portfolio will augur well for earnings in the subsequent quarters. Also, steady improvement in the economy will be conducive for the company’s growth.
Nevertheless, we remain apprehensive owing to several issues, including an expanding cost base.
TCF Financial Corporation Price, Consensus and EPS Surprise
People's United Financial Inc. reported net earnings of 32 cents per share in second-quarter 2018, in line with the Zacks Consensus Estimate. Moreover, the reported figure climbed 33.3% year over year. Results benefited from an improvement in net interest income, and decline in expenses and provisions. Loan balances improved during the quarter.
Riding on higher revenues, Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 2.3% in the April-June quarter. Earnings per share of 88 cents topped the Zacks Consensus Estimate of 66 cents. The company experienced continued expansion of margins and loan growth, which aided revenues. Also, higher deposits and lower expenses were some other positives. However, increase in provisions was the main undermining factor.
SunTrust Banks' (STI - Free Report) Q2 earnings of $1.49 per share outpaced the Zacks Consensus Estimate of $1.30. Also, the figure compared favorably with the prior-year quarter’s earnings of $1.03. Results were primarily driven by rise in revenues as well as lower provisions. Also, an improvement in overall asset quality was a tailwind. Nonetheless, higher expenses hurt results to some extent.
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Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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TCF Financial (TCF) Q2 Earnings Beat, Stock Jumps 1.87%
Shares of TCF Financial Corporation climbed 1.87% in single-day trading following the second-quarter 2018 earnings release on Jul 27, before the market opened. The company reported adjusted earnings per share of 49 cents, beating the Zacks Consensus Estimate of 47 cents. Further, the figure compares favorably with the prior-year quarter figure of 33 cents.
The company witnessed top-line strength in the reported quarter. Furthermore, margin pressure seems to be easing. The quarter also witnessed continued rise in loans and deposits, while maintaining a solid capital position and lower provisions. However, elevated expenses were on the downside.
Including non-recurring items of 15 cents per share, the company reported net income of $58.7 million or 34 cents compared with $60.4 million or 33 cents recorded in the year-ago quarter.
Revenues Improve, Cost Pressure Persists
Total revenues came in at $364.9 million in the quarter, up 6.8% year over year. Moreover, the top line comfortably surpassed the Zacks Consensus Estimate of $363 million.
Net interest income (NII) was up nearly 10.4% year over year to $250.8 million. This rise was mainly attributable to increased interest income on loans and leases held for investment, along with and debt securities available for sale, partially mitigated by rise in total interest expense.
NIM of 4.67% expanded 15 basis points (bps) year over year due to elevated average yields on the variable and adjustable-rate loan portfolios on rising rates, partly offset by escalated cost of funds.
Non-interest income came in at $114.1 million, slightly down on a year-over-year basis. Elevated card revenues were offset by lower fees and other revenues.
TCF Financial reported non-interest expenses of $272 million, up 16.7% from the year-earlier quarter. Rise in almost all components of expenses led to the upsurge.
As of Jun 30, 2018, average deposits improved 6% year over year to $18.4 billion. Average loans and leases climbed 4.2% year over year to $19.1 billion in the June-end quarter.
Credit Quality Improves
Credit quality for TCF Financial marked significant improvement. Non-accrual loans and leases, and other real estate owned slipped 36% year over year to $101.1 million.
Further, provisions for credit losses were $14.2 million, down 26.8% year over year, primarily due to the auto finance portfolio run-off, partly mitigated by rise in provisions in the inventory finance portfolio.
In addition, net charge-offs, as a percentage of average loans and leases, contracted 1 bp year over year to 0.27%. The downside chiefly resulted from lower net charge-offs in the commercial portfolio, partly offset by elevated net charge-offs in the auto finance and leasing and equipment finance portfolios.
Robust Capital Position
TCF Financial’s capital ratios remained strong. As of Jun 30, 2018, Common equity Tier 1 capital ratio was 10.60% compared with 10.24% as of Jun 30, 2017. Total risk-based capital ratio was 13.22% compared with 13.49% as of Jun 30, 2017. Tier 1 leverage capital ratio was 10.31%, down from 10.76% as of Jun 30, 2017.
During the quarter under review, the company repurchased 2.8 million shares of its common stock for a total cost of $68.2 million.
Our Viewpoint
TCF Financial delivered an impressive performance in the April-June quarter. Continued top-line improvement underscores the company’s sturdy standing in the market. At the same time, a strengthening capital position and improving credit quality are anticipated to favor the company’s near-term growth. In addition to this, we believe its efforts to reduce balance-sheet risks and diversify the loan portfolio will augur well for earnings in the subsequent quarters. Also, steady improvement in the economy will be conducive for the company’s growth.
Nevertheless, we remain apprehensive owing to several issues, including an expanding cost base.
TCF Financial Corporation Price, Consensus and EPS Surprise
TCF Financial Corporation Price, Consensus and EPS Surprise | TCF Financial Corporation Quote
TCF Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
People's United Financial Inc. reported net earnings of 32 cents per share in second-quarter 2018, in line with the Zacks Consensus Estimate. Moreover, the reported figure climbed 33.3% year over year. Results benefited from an improvement in net interest income, and decline in expenses and provisions. Loan balances improved during the quarter.
Riding on higher revenues, Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 2.3% in the April-June quarter. Earnings per share of 88 cents topped the Zacks Consensus Estimate of 66 cents. The company experienced continued expansion of margins and loan growth, which aided revenues. Also, higher deposits and lower expenses were some other positives. However, increase in provisions was the main undermining factor.
SunTrust Banks' (STI - Free Report) Q2 earnings of $1.49 per share outpaced the Zacks Consensus Estimate of $1.30. Also, the figure compared favorably with the prior-year quarter’s earnings of $1.03. Results were primarily driven by rise in revenues as well as lower provisions. Also, an improvement in overall asset quality was a tailwind. Nonetheless, higher expenses hurt results to some extent.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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