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TCF Financial Gains From Digitization Efforts, Costs a Woe

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On May 7, we issued an updated research report on TCF Financial Corporation TCF. The company’s digitization efforts to meet customer requirements and solid organic growth indicate its upside potential. However, escalating expenses and declining fee income remain concerns.

Shares of the company have gained 49.8% in a year’s time, outperforming 13.1% growth of the industry it belongs to.

Moreover, the Zacks Consensus Estimate for current-year earnings has been revised 1.1% upward, over the last 30 days. As a result, it currently carries a Zacks Rank #3 (Hold).

TCF Financial’s consistent organic growth keeps us encouraged. Over the five years ended 2017, the company’s loans and deposits have witnessed a CAGR of 4.8% and 6.2%, respectively. Also, aided by the improving economy, the uptrend in these balances is likely to continue in the near term.

The company’s focus on strengthening footprint in the Chicago region along with introduction of digital platforms are likely to help it better serve customers. In 2017, TCF Financial launched the digital platform, which helped it attract new customers and deposits.

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 has witnessed a CAGR of 6.7% over the last five years (ended 2017). Thus, such continuous uptrend in costs is likely to strain bottom-line growth.

Stocks to Consider

Lazard’s LAZ Zacks Consensus Estimate for earnings for 2018 was revised 9% upward, in the last 60 days. Also, its share price has increased 36.9% in the past 12 months. The stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cullen/Frost Bankers CFR currently carries a Zacks Rank #2. The stock’s 2018 earnings estimates were revised 5.4% upward, in the last 60 days. Further, the company’s shares have gained 25.1% in a year’s time.

People’s Bancorp’s PEBO Zacks Consensus Estimate for earnings for current year was revised 1.6% upward, over the last 60 days. Moreover, in the past year, its shares have gained 9.4%. Also, it carries a Zacks Rank of 2.

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