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On Apr 2, we initiated our coverage on 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 improving net interest income. 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 this Zacks Rank #3 (Hold) stock.

Why the Neutral Stance?

TCF Financial’s organic growth through its huge deposits base, diversification in revenue avenues and capital boosting initiatives prompted us to initiate with this stance.

Further, the company witnessed a rise in net interest margin attributed to lower average cost of borrowings due to the effects of the company’s balance sheet repositioning completed in Mar 2012. Moreover, with a stable capital position and regular dividend payments, TCF Financial remains an asset for yield-seeking investors.

However, with the growing level of non-interest expenses, the company is exposed to operational risks. In addition, the company’s profitability remains vulnerable to the stringent regulatory landscape and exposure to residential real estate.

Further, in the fourth quarter of 2012, TCF Financial was marginally below the Zacks Consensus Estimate, impacted by a dip in total revenue and elevated non-interest expenses. The company is expected to announce its first-quarter 2013 results on Apr 19.

The Zacks Consensus Estimate for the first quarter is pegged at 19 cents per share. Further, over the last 30 days, the Zacks Consensus Estimate for 2013 has remained stable at 93 cents, while it moved north by 0.9% to $1.17 per share for 2014.

Other Stocks to Consider

Besides TCF Financial, other stocks in the financial industry that are currently performing well include Firstbank Corporation with a Zacks Rank #1 (Strong Buy), while First Interstate Bancsystem Inc. (FIBK - Snapshot Report) and Old National Bancorp. (ONB - Snapshot Report) carry a Zacks Rank #2 (Buy).

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