On Aug 21, we issued an updated research report on TCF Financial Corporation (TCF - Free Report) . The company’s efforts to improve digital offerings in order to meet customer expectations, along with robust organic growth, reflect its upside potential. However, escalating expenses and pressure on margin are major concerns.
The company has been witnessing upward estimate revisions, reflecting analysts’ optimism about its growth prospects. Over the past 30 days, the Zacks Consensus Estimate for its 2020 earnings moved 3.3% north.
TCF Financial’s price performance is also encouraging. Shares of this Zacks Rank #3 (Hold) company have gained 0.8% in the past three months compared with the industry’s growth of 2.6%.
Looking at its fundamentals, a solid deposit base has supported the company’s organic growth. Notably, over the last five years (2015-2019), deposits saw a CAGR of 19.8%. We believe a huge deposits base will help the bank fund loan growth as well as meet other general business purposes. Loans also witnessed a five-year CAGR of 18.6% in 2019. Both metrics continued to rise in the first six months of 2020.
TCF Financial’s fee income growth is a positive factor. Over the last three years (ended 2019), non-interest income saw a CAGR of 1.9%, with the increasing trend continuing in the first two quarters of 2020 as well. With the company’s efforts to make investments in opportunistic areas, fee income is likely to keep supporting top-line growth.
Further, its credit metrics have been improving since the financial crisis though deteriorated in the first half of 2020 due to the coronavirus crisis. Yet, its diversified loan portfolio is likely to keep credit quality at normalized levels.
Non-interest expenses of the company witnessed a five-year (2015-2019) compound annual growth rate (CAGR) of 10.5%, with the increasing trend continuing in the first six months of 2020. Though the company expects to achieve $180 million of merger-related cost savings by the end 2020, costs are likely to remain elevated on growth in staff level to support business growth.
Also, given the Federal Reserve’s accommodative monetary policy stance and lower yields, the bank’s key metric is likely to be under pressure in the quarters ahead.
Stocks to Consider
TD Ameritrade Holding Corporation has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 Ranked (Strong Buy) stock has rallied more than 9% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
E*TRADE Financial Corporation has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained 28.7% in the past three months. At present, it carries a Zacks Rank of 2 (Buy).
Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped 34.5% in three months’ time. It currently sports a Zacks Rank #1.
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