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Why Is TCF Financial (TCF) Up 38.7% Since Last Earnings Report?

Zacks Equity Research
·4 min read

A month has gone by since the last earnings report for TCF Financial (TCF). Shares have added about 38.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TCF Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

TCF Financial Q3 Earnings Top Estimates, Revenues Down

TCF Financial reported third-quarter 2020 adjusted earnings per share of 63 cents, beating the Zacks Consensus Estimate by 1 cent. Also, the figure increased 16.7% from the prior quarter.

Disciplined cost management aided the bank’s performance. Also, the company witnessed decent loans and deposits balance. Moreover, lower provisions were on the upside. However, margin pressure and lower fee income were undermining factors.

Including post-tax merger-related expenses and notable items, the company reported net income of $55.7 million or 35 cents compared with the $23.8 million or 14 cents recorded in the previous quarter.

Revenues Down, Cost Declines

Total revenues came in at $496 million in the reported quarter, down 3% sequentially. The top-line figure also lagged the Zacks Consensus Estimate of $503.8 million.

Net interest income was down marginally sequentially to $377.2 million. This decline mainly resulted from decreased interest income on loans and leases and other earning assets, partially mitigated by a fall in total interest expense. The NIM of 3.31% contracted 2 basis points (bps) sequentially.

Non-interest income came in at $118.8 million, down 10.7% on a sequential basis. Fall in almost all components of income chiefly resulted in this decrease, partly offset by reduced leasing revenue, servicing fee revenues and other revenues, along with lower net gains on sales of loans and leases.

TCF Financial reported non-interest expenses of $373.4 million, down 6.7% from the second quarter. This decrease primarily reflects the lower merger-related expenses, compensation and employee benefits, along with occupancy and equipment expenses.

Adjusted efficiency ratio was 61.17%, up from the prior quarter’s 59.8%. A rise in ratio indicates fall in profitability.

As of Sep 30, 2020, total deposits decreased marginally sequentially to $39.2 billion. Additionally, net loans and leases declined 3.4% to $34.3 billion during the September-end quarter.

Credit Quality: A Mixed Bag

Credit quality for TCF Financial reflected mixed credit metrics. Non-accrual loans and leases, and other real estate owned jumped 23.4% sequentially to $412.3 million.

Provisions for credit losses were $69.7 million, 11.5% down on a sequential basis. Net charge-offs, as a percentage of average loans and leases, expanded 24 bps sequentially to 0.28%. Non-performing assets as a percentage of total loans and leases and other real estate owned came in at 1.2%, up 26 bps sequentially.

Robust Capital Position

TCF Financial’s capital ratios remained strong. As of Sep 30, 2020, Common equity Tier 1 capital ratio was 11.45% compared with 11.06% as of Jun 30, 2020. Total risk-based capital ratio was 14.04% compared with 13.47% as of Jun 30, 2020. Tier 1 leverage capital ratio was 8.83%, down from 8.75% as of Jun 30, 2020.


The company expects excess liquidity to decline, lower repricing of deposits to continue and the potential for seasonal growth in the higher-yielding Inventory Finance business to provide tailwinds for the margin.

Adjusted non-interest expense is expected to remain below $321 million in the fourth quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, TCF Financial has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise TCF Financial has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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