Market Overview

Bank Of America Double Upgrades TCF Financial After Meeting Execs

Bank Of America Double Upgrades TCF Financial After Meeting Execs

The bullish case for TCF Financial Corporation (NYSE: TCF), a regional Minnesota-based bank holding company with branches in seven states, can now be made, according to Bank of America Merrill Lynch. 

The Analyst

BofA's Ebrahim Poonawala upgraded TCF Financial from Underperform to Buy with a price target lifted from $25 to $30.

The Thesis

Poonawala said he turned bullish on TCF after a meeting with Chairman and CEO Craig Dahl and CFO Brian Maass. (See the analyst's track record here.) 

A decline in the auto book from 14 percent of loans today to an estimated 4 percent by the end of 2019 will allow the bank to better allocate cash into lower-risk weighted assets and simultaneously reduce overall credit risk, the analyst said. 

The execs highlighted the benefits of centralizing back office functions across the national lending business, which has historically operated as a separate entity, Poonawala said. While TCF didn't offer any specific financial targets, any initiatives could help boost the efficiency ratio to continue trending lower from 67 percent in 2018 to an estimated 66.1 percent in 2019, he said. 

The low beta nature of TCF Financial's deposit base will continue to appreciate in value as the financial industry deals with higher funding costs, the analyst said. From an organic point of view, this should allow management to defend its margins against higher rates, as it can compete for consumer deposits, he said. 

TCF appears to be "more front-footed and ready to play offense," which counters last year's bearish case of defensive actions, according to BofA. The stock now offers an attractive risk-reward profile, the firm said.  

Price Action

TCF shares were trading up 3.25 percent to $26.36 at the time of publication Thursday.

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Latest Ratings for TCF

Oct 2020DA DavidsonInitiates Coverage OnNeutral
Sep 2020Piper SandlerMaintainsOverweight
Aug 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for TCF
View the Latest Analyst Ratings


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