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TCF Financial (TCF) Q3 Earnings Top Estimates, Revenues Down

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TCF Financial Corporation (TCF - Free Report) reported third-quarter 2020 adjusted earnings per share of 63 cents, beating the Zacks Consensus Estimate by 1 cent. Also, the figure increased 16.7% from the prior quarter.

Disciplined cost management aided the bank’s performance. Also, the company witnessed decent loans and deposits balance. Moreover, lower provisions were on the upside. However, margin pressure and lower fee income were undermining factors.

Including post-tax merger-related expenses and notable items, the company reported net income of $55.7 million or 35 cents compared with the $23.8 million or 14 cents recorded in the previous quarter.

Revenues Down, Cost Declines

Total revenues came in at $496 million in the reported quarter, down 3% sequentially. The top-line figure also lagged the Zacks Consensus Estimate of $503.8 million.

Net interest income was down marginally sequentially to $377.2 million. This decline mainly resulted from decreased interest income on loans and leases and other earning assets, partially mitigated by a fall in total interest expense. The NIM of 3.31% contracted 2 basis points (bps) sequentially.

Non-interest income came in at $118.8 million, down 10.7% on a sequential basis. Fall in almost all components of income chiefly resulted in this decrease, partly offset by reduced leasing revenue, servicing fee revenues and other revenues, along with lower net gains on sales of loans and leases.

TCF Financial reported non-interest expenses of $373.4 million, down 6.7% from the second quarter. This decrease primarily reflects the lower merger-related expenses, compensation and employee benefits, along with occupancy and equipment expenses.

Adjusted efficiency ratio was 61.17%, up from the prior quarter’s 59.8%. A rise in ratio indicates fall in profitability.

As of Sep 30, 2020, total deposits decreased marginally sequentially to $39.2 billion. Additionally, net loans and leases declined 3.4% to $34.3 billion during the September-end quarter.

Credit Quality: A Mixed Bag

Credit quality for TCF Financial reflected mixed credit metrics. Non-accrual loans and leases, and other real estate owned jumped 23.4% sequentially to $412.3 million.

Provisions for credit losses were $69.7 million, 11.5% down on a sequential basis. Net charge-offs, as a percentage of average loans and leases, expanded 24 bps sequentially to 0.28%. Non-performing assets as a percentage of total loans and leases and other real estate owned came in at 1.2%, up 26 bps sequentially.

Robust Capital Position

TCF Financial’s capital ratios remained strong. As of Sep 30, 2020, Common equity Tier 1 capital ratio was 11.45% compared with 11.06% as of Jun 30, 2020. Total risk-based capital ratio was 14.04% compared with 13.47% as of Jun 30, 2020. Tier 1 leverage capital ratio was 8.83%, down from 8.75% as of Jun 30, 2020.

Our Viewpoint

TCF Financial put up a decent performance during the July-September period as a combined entity following the merger of equals. Continued expense management reflects the company’s cost-control initiatives. Nevertheless, reduction in revenues is a concern. Further, low rates are expected to keep straining margins.

Though the company’s efforts to reduce balance-sheet risks and diversify the loan portfolio will augur well for earnings in the subsequent quarters, a lower fee income is a headwind.
 

TCF Financial Corporation Price, Consensus and EPS Surprise

TCF Financial Corporation Price, Consensus and EPS Surprise

TCF Financial Corporation price-consensus-eps-surprise-chart | 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

Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2020 earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in 8.4% lower than the prior-year quarter’s level. Results primarily benefited from growth in asset balance. Nonetheless, slightly lower revenues and rise in expenses were undermining factors.

First Republic Bank (FRC - Free Report) delivered a positive earnings surprise of 16.7% in the third quarter on solid top-line strength. Earnings per share of $1.61 outpaced the Zacks Consensus Estimate of $1.38. Additionally, the bottom line climbed 22.9% from the year-ago quarter. Results were supported by an increase in NII and fee income. Yet, higher expenses and elevated provisions were offsetting factors.

Regions Financial (RF - Free Report) reported third-quarter 2020 adjusted earnings of 49 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, results compared favorably with the prior-year period earnings of 39 cents. Results were driven by higher revenues on increases in both NII and fee income. Furthermore, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Nevertheless, higher provisions for credit losses and rise in expenses were undermining factors.

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