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HBAN or TCF: Which Bank Stock Will Provide Better Returns?

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The U.S. banking sector has been the center of attraction for quite some time now due to the favorable turn of events since Trump took office. Moreover, continual rise in interest rates and lower commercial tax rate are likely to further boost profitability of the banks.

In addition, prospects of relieving banks from some of the stringent requirements of Dodd-Frank Act has made them optimistic of future earnings growth and raised investors’ sentiments greatly.

Also, the lending scenario is expected to receive a push from the tax reform while the Fed’s moves will keep increasing competition for deposits in the months ahead. Thus, keeping the above factors in mind, it is likely that the momentum in banking stocks will continue.

We are considering two such banks that are well poised to benefit from the improving economic backdrop — Huntington Bancshares Incorporated HBAN and TCF Financial Corporation TCF.

With a market cap of $16.2 billion, Huntington offers full-service commercial and consumer banking services, mortgage banking services, equipment leasing, investment management along with trust and brokerage services. TCF Financial provides retail banking, commercial banking services, commercial leasing and equipment finance along with commercial inventory finance services and has a market cap of about $3.8 billion.

Both Huntington and TCF Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wondering which is a better pick? As both the stocks are part of the same industry, we have considered their underlying strength and growth prospects  to determine which one is a better investment choice.

Price Performance

Over the past year, shares of TCF Financial have soared 35.9% compared with 11.4% gain for Huntington. While both the stocks have outperformed industry’s growth of 10.1%, TCF Financial clearly steals the show.


Dividend Yield

A dividend yield informs investors how much income they are receiving in relation to the price of the stock. Huntington has a current dividend yield of 2.97% while TCF Financial has a dividend yield of 2.64%.

Although both the stocks’ dividend yield is better than the industry’s average of 1.97%, shareholders of Huntington gain more.


Leverage Ratio

Leverage ratio helps provide insight on the financial health of the banks. The debt/equity ratio of both, Huntington (0.94) and TCF Financial (0.52), is more than the industry’s average (0.43).

Hence, TCF Financial has an edge here.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for Huntington and TCF Financial is 12.12% and 9.85%, respectively. Both the stocks are more efficient than their peers as the ROE for the industry is 9.30%, Huntington seems to be better positioned in terms of reinvesting its earnings when compared with TCF Financial.



Huntington has a price-to-earnings (P/E) ratio of 12.12 and price-to-cash flow (P/CF) ratio of 9.99, with a Value Score of C. TCF Financial has a P/E ratio of 13.05 and P/CF ratio of 7.52, with a Value Score of B. Both the stocks seem to be undervalued when compared with the averages of 13.78 for P/E ratio and 14.24 for P/CF ratio.

However, TCF Financial seems to be at an advantage here due to a favorable Value Score. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Earnings Estimate Revisions & Growth Projections

For Huntington, the Zacks Consensus Estimate for earnings per share currently stands at $1.21 for 2018, representing year-over-year growth of 36%. For TCF Financial, earnings for the current-year are projected to jump 41.7% year over year to $1.70.

The Zacks Consensus Estimate for 2018 earnings of Huntington and TCF Financial has increased nearly 1%, over the last 60 days.

Thus, we find this round to be biased toward TCF Financial.

Sales Growth

For Huntington, the Zacks Consensus Estimate for sales is $4.58 billion for 2018, reflecting 6.3% rise from the prior year.

For TCF Financial, the consensus estimate for sales stands at $1.43 billion, indicating growth of 3.8% year over year.

Therefore, Huntington has a lead on this aspect.


Our comparative analysis indicates that TCF Financial is positioned better than Huntington when considering price performance, leverage ratio, favorable valuation and earnings growth expectations. Huntington wins on sales growth projections, reinvesting potential and dividend yield.

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Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report
TCF Financial Corporation (TCF) : Free Stock Analysis Report
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