A month has gone by since the last earnings report for TCF Financial . Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TCF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
TCF Financial Q3 Earnings Beat on Higher Revenues
TCF Financial 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.
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 $366.5 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 increase.
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.
Outlook
The company expects mid-single digit growth in loan and lease (excluding auto) in 2018 with continued investment portfolio expansion. The company expects continued strong loan and lease growth in commercial, leasing and equipment finance and inventory finance portfolios.
As interest rate continues to increase, management expects upward pressure on deposit costs going forward due to competition as well as very low non-CD deposit beta.
Management expects return on an average tangible common equity to be in the range of 11.5-13.5% in 2018 compared with its average of about 10% over the past five years.
Efficiency ratio is anticipated to lie in the range of 66-68% in 2018 compared with the company’s average over the past five years of nearly 70%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, TCF has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
TCF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is TCF (TCF) Up 4% Since Last Earnings Report?
A month has gone by since the last earnings report for TCF Financial . Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TCF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
TCF Financial Q3 Earnings Beat on Higher Revenues
TCF Financial 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.
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 $366.5 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 increase.
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.
Outlook
The company expects mid-single digit growth in loan and lease (excluding auto) in 2018 with continued investment portfolio expansion. The company expects continued strong loan and lease growth in commercial, leasing and equipment finance and inventory finance portfolios.
As interest rate continues to increase, management expects upward pressure on deposit costs going forward due to competition as well as very low non-CD deposit beta.
Management expects return on an average tangible common equity to be in the range of 11.5-13.5% in 2018 compared with its average of about 10% over the past five years.
Efficiency ratio is anticipated to lie in the range of 66-68% in 2018 compared with the company’s average over the past five years of nearly 70%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, TCF has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
TCF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.