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TCF Financial Gains From Organic Growth, Costs Increase

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On Sep 5, 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 indicate its upside potential. However, escalating expenses and declining fee income remain major concerns.

The Zacks Consensus Estimate for current-year earnings have remained stable at $1.84 over the last 30 days. As a result, it currently carries a Zacks Rank #3 (Hold).

Shares of the company have gained 73% in a year’s time, outperforming 32.8% growth of the industry it belongs to.

TCF Financial’s consistent organic growth keeps us encouraged. Over the five years ended 2017, the company’s loans and deposits witnessed a CAGR of 4.8% and 6.2%, respectively. Moreover, management expects continued strong loan and lease growth in commercial, leasing and equipment finance and inventory finance portfolios. Also, rising interest rates support the company’s margin expansion, thereby boosting net interest income.

Further, TCF Financial’s remains focused on strengthening footprint in the Chicago region along with introduction of digital platforms, which is likely to help it better serve customers. Apart from increasing ATM locations, the company’s digitization strategy also calls for enhancement of retail branches and digital platforms.

Further, its credit metrics have been improving over the last few quarters. Also, its diversified loan portfolio helps in keeping credit quality at normalized levels.

However, consistently falling ATM revenues along with fees and service charges (together contributing 72% of total banking fees revenues) are likely to keep its top line under pressure.

Also, the company’s expense base witnessed a CAGR of 6.7% over the last five years (ended 2017) driven by growth in staff level to support business growth. Thus, such continuous uptrend in costs is likely to strain bottom-line growth.

Stocks to Consider

Wintrust Financial Corporation’s (WTFC - Free Report) Zacks Consensus Estimate for earnings for 2018 has been revised 2.7% upward in the last 60 days. Also, its share price has increased 31.2% in the past 12 months. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Commerce Bancshares, Inc. (CBSH - Free Report) currently carries a Zacks Rank #2. The stock’s 2018 earnings estimates have been revised 7.8% upward in the last 60 days. Further, the company’s shares have gained 43.9% in a year’s time.

Lakeland Financial Corporation (LKFN - Free Report) Zacks Consensus Estimate for earnings for the current year has been revised 2% upward over the last 60 days. Moreover, in the past year, its shares have gained 18%. Also, it carries a Zacks Rank of 2.

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