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TCF Financial Corporation reported positive earnings surprise of 4.1% in third-quarter 2018. Earnings per share of 51 cents surpassed the Zacks Consensus Estimate of 49 cents. Further, the bottom line compares favorably with the prior-year quarter figure of 29 cents.
Shares of TCF Financial declined 6.28% in single-day trading following the earnings release on Oct 22, before the market opened. The sharp drop in price reflects investors’ reaction on year-over-year slowdown in loan growth and expansion of net interest margin, despite rising interest rates.
Nevertheless, the company witnessed overall top-line strength in the reported quarter. Also, the quarter witnessed significant improvement in credit quality while maintaining a solid capital position. However, elevated expenses were on the downside.
The company reported net income of $86.2 million compared with $60.5 million recorded in the year-ago quarter.
Revenues Improve, Cost Pressure Persists
Total revenues came in at $365.6 million in the quarter, up 6.5% year over year. However, the top line lagged the Zacks Consensus Estimate of $366.53 million,
Net interest income was up nearly 6.4% year over year to $249.1 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 interest expenses.
Net interest margin of 4.66% expanded 5 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 $116.4 million, up 6.6% on a year-over-year basis. Elevated card revenues along with leasing and equipment finance income were partially offset by lower servicing fees and loss on debt securities.
TCF Financial reported non-interest expenses of $246.4 million, up 4.8% from the year-earlier quarter. Rise in almost all components of expenses led to the upsurge.
As of Sep 30, 2018, average deposits improved 3.6% year over year to $18.3 billion. Average loans and leases climbed marginally to $18.4 billion in the quarter.
Credit Quality Improves
Credit quality for TCF Financial saw significant improvement. Non-accrual loans and leases, and other real estate owned slipped 25.1% year over year to $109.4 million.
Further, provisions for credit losses were $2.3 million, down 84.4% year over year, primarily due to the auto finance portfolio run-off along with recovery of some prior charge-offs, partly mitigated by rise in provisions in the auto finance portfolio.
In addition, net charge-offs, as a percentage of average loans and leases, contracted 3 bps year over year to 0.15%. The downside chiefly resulted from recoveries, partly offset by elevated net charge-offs in the auto finance portfolios.
Capital Position
As of Sep 30, 2018, Common equity Tier 1 capital ratio was 11.04% compared with 10.05% as of Sep 30, 2017. Total risk-based capital ratio was 13.66% compared with 13.21% as of Sep 30, 2017. Tier 1 leverage capital ratio was 10.58%, down from 10.88% as of September, 2017 end.
During the quarter under review, the company repurchased 0.9 million shares of its common stock for a total cost of $24 million.
Our Viewpoint
TCF Financial’s 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 its near-term growth. In addition to this, we believe its efforts to reduce balance-sheet risks and diversify the loan portfolio 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
Texas Capital Bancshares Inc. (TCBI - Free Report) reported a negative earnings surprise of 4.1% in third-quarter 2018. Earnings per share of $1.65 lagged the Zacks Consensus Estimate of $1.72. However, results compare favorably with $1.12 recorded in the prior-year quarter.
Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 3.3% in third-quarter 2018, riding on higher revenues. Adjusted earnings per share of 93 cents topped the Zacks Consensus Estimate of 90 cents. Also, the bottom line compared favorably with 68 cents per share reported in the prior-year quarter.
People's United Financial Inc. delivered a negative earnings surprise of 2.9% in third-quarter 2018. Net earnings of 33 cents per share lagged the Zacks Consensus Estimate by a penny. However, the reported figure improved 26.9% year over year.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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TCF Financial (TCF) Stock Falls 6% Despite Q3 Earnings Beat
TCF Financial Corporation reported positive earnings surprise of 4.1% in third-quarter 2018. Earnings per share of 51 cents surpassed the Zacks Consensus Estimate of 49 cents. Further, the bottom line compares favorably with the prior-year quarter figure of 29 cents.
Shares of TCF Financial declined 6.28% in single-day trading following the earnings release on Oct 22, before the market opened. The sharp drop in price reflects investors’ reaction on year-over-year slowdown in loan growth and expansion of net interest margin, despite rising interest rates.
Nevertheless, the company witnessed overall top-line strength in the reported quarter. Also, the quarter witnessed significant improvement in credit quality while maintaining a solid capital position. However, elevated expenses were on the downside.
The company reported net income of $86.2 million compared with $60.5 million recorded in the year-ago quarter.
Revenues Improve, Cost Pressure Persists
Total revenues came in at $365.6 million in the quarter, up 6.5% year over year. However, the top line lagged the Zacks Consensus Estimate of $366.53 million,
Net interest income was up nearly 6.4% year over year to $249.1 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 interest expenses.
Net interest margin of 4.66% expanded 5 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 $116.4 million, up 6.6% on a year-over-year basis. Elevated card revenues along with leasing and equipment finance income were partially offset by lower servicing fees and loss on debt securities.
TCF Financial reported non-interest expenses of $246.4 million, up 4.8% from the year-earlier quarter. Rise in almost all components of expenses led to the upsurge.
As of Sep 30, 2018, average deposits improved 3.6% year over year to $18.3 billion. Average loans and leases climbed marginally to $18.4 billion in the quarter.
Credit Quality Improves
Credit quality for TCF Financial saw significant improvement. Non-accrual loans and leases, and other real estate owned slipped 25.1% year over year to $109.4 million.
Further, provisions for credit losses were $2.3 million, down 84.4% year over year, primarily due to the auto finance portfolio run-off along with recovery of some prior charge-offs, partly mitigated by rise in provisions in the auto finance portfolio.
In addition, net charge-offs, as a percentage of average loans and leases, contracted 3 bps year over year to 0.15%. The downside chiefly resulted from recoveries, partly offset by elevated net charge-offs in the auto finance portfolios.
Capital Position
As of Sep 30, 2018, Common equity Tier 1 capital ratio was 11.04% compared with 10.05% as of Sep 30, 2017. Total risk-based capital ratio was 13.66% compared with 13.21% as of Sep 30, 2017. Tier 1 leverage capital ratio was 10.58%, down from 10.88% as of September, 2017 end.
During the quarter under review, the company repurchased 0.9 million shares of its common stock for a total cost of $24 million.
Our Viewpoint
TCF Financial’s 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 its near-term growth. In addition to this, we believe its efforts to reduce balance-sheet risks and diversify the loan portfolio 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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Texas Capital Bancshares Inc. (TCBI - Free Report) reported a negative earnings surprise of 4.1% in third-quarter 2018. Earnings per share of $1.65 lagged the Zacks Consensus Estimate of $1.72. However, results compare favorably with $1.12 recorded in the prior-year quarter.
Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 3.3% in third-quarter 2018, riding on higher revenues. Adjusted earnings per share of 93 cents topped the Zacks Consensus Estimate of 90 cents. Also, the bottom line compared favorably with 68 cents per share reported in the prior-year quarter.
People's United Financial Inc. delivered a negative earnings surprise of 2.9% in third-quarter 2018. Net earnings of 33 cents per share lagged the Zacks Consensus Estimate by a penny. However, the reported figure improved 26.9% year over year.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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