TCF Financial Shows Organic Growth Potential - Analyst Blog

On Jun 11, 2014, we issued an updated research report on TCF Financial Corporation TCB. This Minnesota – based bank exhibits decent fundamentals amid a competitive banking environment.

TCF Financial's improving deposits continue to complement its organic growth potential. The company has been able to sustain growth in its deposit balances over the past few years. Total deposits have grown at a 5-year CAGR of 5.7% (2009-2013). Further, during first-quarter 2014, deposits grew 2.6% sequentially, reflecting the 14th consecutive quarter of growth.

TCF Financial's solid capital position is reflected by its efforts in enhancing shareholder value. For first-quarter 2014, the company's common dividend payout ratio was 20.83%. Moreover, over the last 3 years, the company enhanced shareholder value by returning over $115 million through dividends.  We view TCF Financial as a sound asset for yield-seeking investors.

TCF Financial's first-quarter 2014 earnings per share of 24 cents were in line with the Zacks Consensus Estimate. However, the figure was up 50% from the prior-year quarter earnings. Results reflected improved top line and lower provision for credit losses, partially offset by increased non-interest expenses.

Despite the positives, we remain cautious owing to several issues faced by TCF Financial. These include a continuous decline in card revenues that account for a significant part of fee revenue, increasing level of non-interest expenses and the prevailing stringent regulatory landscape.

Analysts' mixed stance on the stock was reflected in the movement of the Zacks Consensus Estimate over the past 60 days. For 2014, the Zacks Consensus Estimate remained stable at $1.10 per share while it fell nearly 1% to $1.27 per share for 2015.

TCF Financial's currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Capital City Bank Group Inc. CCBG, and KCG Holdings, Inc. KCG and Commerce Bancshares, Inc. CBSH are among the better-ranked stocks in the finance sector. Both Capital City and KCG Holdings sport a Zacks Rank #1 (Strong Buy) while Commerce Bancshares holds a Zacks Rank #2 (Buy).