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TCF Financial (TCF) Displays Cost Pressure: Time to Sell?

Zacks

On Jun 9, we issued an updated research report on TCF Financial Corporation TCF. While this Minnesota-based various retail and commercial banking products and services provider is getting digitized as per customers’ requirements and reflecting organic growth, its escalating expenses and declining fee income remain concerns.

Further, cost pressure on the company led to a 16.3% decline in share price over the last six months, as compared with 1.1% growth recorded by the Zacks categorized Midwest Banks industry.



Moreover, the company’s earnings estimate has declined 3.3% for the current year, over the last 60 days. As a result, it currently carries a Zacks Rank #4 (Sell).

Looking at the fundamentals, due to a decrease in the average interchange rate per transaction owing to debit card interchange regulations, effective Oct 1, 2011, banking fee revenues have been experiencing a decline. While ATM revenues recorded a 5-year (2012–2016) negative CAGR of 4.2%, fee and service charges declined at a 5-year CAGR of 6.2%. Notably, the decreasing trend persisted in first-quarter 2017 as well.

Overall non-interest expenses for the company witnessed a 4-year (2013–2016) CAGR of 2.5%, with the trend continuing in first-quarter 2017. Though the company intends to manage expense and generate operating leverage, costs are likely to flare up, driven by rise in staff level to support business growth.

Regulatory issues are also a concern for TCF Financial, given its potential impact on the company’s profitability through elevated costs, limited fee generation opportunities, as well as reduced flexibility with respect to its business.

Key Picks from the Sector

Comerica Incorporated CMA has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock climbed around 6.8%, over the past six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

M&T Bank Corporation MTB has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 6.6%. It carries a Zacks Rank #2 (Buy).

The PNC Financial Services Group, Inc. PNC has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 7.3%, over the last six months. It presently holds a Zacks Rank #2.

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