A month has gone by since the last earnings report for TCF Financial (NASDAQ:TCF). Shares have added about 3.6% 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 its most recent earnings report in order to get a better handle on the important drivers.
TCF Financial Q4 Earnings Top Estimates, Expenses Down
TCF Financial reported fourth-quarter 2020 adjusted earnings per share of 75 cents, beating the Zacks Consensus Estimate by 4 cents. The figure, however, decreased 16.7% from the prior-year quarter.
Disciplined cost management aided the bank’s quarterly 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 $91.4 million or 58 cents compared with the $112.4 million or 72 cents recorded in the previous-year quarter.
In 2020, the company reported net income of $212.8 million compared with the $285.5 million recorded in the prior year.
Revenues Down, Cost Declines, Loans Up
Total revenues came in at $508.6 million in the reported quarter, down 10.3% year over year. The top-line figure, however, outpaced the Zacks Consensus Estimate of $501 million.
In 2020, total revenues were $2.05 billion, up 17.1% year over year.
Net interest income was down 6.7% year on year to $381.4 million during the fourth quarter. This decline mainly resulted from decreased interest, partially mitigated by a fall in total interest expense. NIM of 3.55% contracted 34 basis points (bps) year over year.
Non-interest income came in at $127.2 million, down 19.5% on a year-over-year basis. Fall in almost all components of income chiefly resulted in this decrease, partly offset by higher net gains on sales of loans and leases, and solid wealth management revenues.
TCF Financial reported non-interest expenses of $379.1 million, down 9% from the prior-year quarter. This decrease primarily reflects the lower merger-related expenses, occupancy and equipment and other expenses, partly offset by higher compensation and employee benefit expenses.
Adjusted efficiency ratio was 64.8%, up from the prior-year quarter’s 58.51%. A rise in ratio indicates fall in profitability.
As of Dec 31, 2020, total deposits decreased marginally sequentially to $38.9 billion. However, total loans and leases increased slightly to $34.5 billion during the December quarter.
Credit Quality: A Mixed Bag
Credit quality for TCF Financial reflected mixed credit metrics. Total non-performing assets more than doubled to $710.5 million on a year-over-year basis.
Provisions for credit losses were $11.8 million, down 17.9% on a year-over-year basis to 0.14%. Non-performing assets as a percentage of total loans and leases and other real estate owned came in at 2.06%, up 147 bps.
Robust Capital Position
TCF Financial’s capital ratios remained strong. As of Dec 31, 2020, Common equity Tier 1 capital ratio was 11.45% compared with 10.99% as of Dec 31, 2019. Total risk-based capital ratio was 14.03% compared with 12.70% as of Dec 31, 2019. Tier 1 leverage capital ratio was 9.34%, down from 9.49% as of Dec 31, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 7.98% due to these changes.
VGM Scores
Currently, TCF Financial has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise TCF Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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