Cost Reductions And Lowering Loan Loss Provision Led TCF Financial To Stronger 2Q

Rising earning assets via persisted surge in automotive loans and lease financings, TCF Financial (TCB, Neutral) posted stronger second quarter earnings which were led by shrinking costs, limiting its loan loss provision and specialty finance division saw solid growth providing improved asset yields. Revenue rose 3% year over year to $310 million while net income of $48.3 million ($0.29 per diluted share) in the second quarter of 2014, relative to $34.1 million ($0.21 per diluted share) a year ago.

The fundamental contrast between this year’s and previous year’s results remained the provision for loan losses, which was $9.9 million in second quarter 2014 relative to $32.6 million in second quarter 2013. Additionally, leasing and equipment finance revenue grew by 40.1 percent to $23.0 million for second quarter 2014 relative to a year ago. TCF’s net interest margin reduced somewhat to 4.65 percent for second quarter 2014 relative to 4.66 percent in the previous quarter. TCF is yet keeping the perks to its net interest margin from the 2012 balance sheet streamlining.

By and large, loans dropped by 1.0 percent relative to previous quarter as seasonality in the inventory finance portfolio accounted to a fall of 11.5 percent in that section in second quarter. In general, we anticipate loans to increase as automotive and lease financing persist to face solid surge. Enhancing asset quality persists to satisfyingly amaze us as net charge offs now accounts 0.45 percent of loans throughout the second quarter of 2014, relative to 0.70 percent a year ago.

TCF largely gained from its huge Midwestern branch network of brick and mortar sites and well-located grocery store spots to draw retail deposits. Consequently, the bank gained deposits at 0.22% low rates helping company to make better net interest margins. Although, this cost of deposit estimates the present aggregate mean of United States banks. Opportune franchise and solid capital base insulate the company from huge loan losses; irrespective of lofty-yielding lending businesses cause increasing risk of losses. TCF Financial stocks currently have $19 price target, up from $18, along with ‘Neutral’ rating, with no further changes.


Andy Weld, CFA, is an editor and equity analyst for The Downtown Leader. If you have a great story idea for Andy Weld, you can write at [ ].