TCF Financial, in and out of Wall Street’s good graces for a decade, has regained widespread investor favor in recent months.
“It takes time for banks to remake themselves, but TCF is underway with what will be a multiyear process of becoming a more focused, higher quality bank focused on middle-market depositors and specialty lending,” independent analyst Stephen Simpson wrote recently on investor website Seeking Alpha. “Although there will be some headwinds … TCF’s above-average asset sensitivity will ease some of those challenges.”
TCF’s stock price has climbed from less than $15 within the last year to around $25 per share in recent weeks. In April, the Plymouth-based bank reported unexpectedly strong first-quarter earnings, a plan that seems to be working and a bright horizon.
TCF’s first-quarter profits surged 59 percent to $73.7 million on a 9 percent boost in revenue to $355.4 million. Profitability bloomed from diversified businesses, bolstered by low-cost consumer deposits and a phone and online consumer strategy that is restraining noninterest expenses.
Thanks partly to higher profitability and the recent federal tax cuts, TCF has raised its shareholder dividend. It may buy back stock and will continue to invest in what’s working, CEO Craig Dahl told analysts recently.
“As we look to build on our first-quarter momentum … we are focused on driving shareholder value through strong execution of our strategy,” Dahl said. “We are [reducing] the risk profile of our balance sheet to further lower our credit, operational and liquidity risks. We also maintain a positive outlook for our diversified lending businesses, including consumer real estate, commercial, leasing and equipment finance and inventory finance business from a growth, profitability and credit-quality perspective.”
Dahl, who replaced the late Bill Cooper as the boss in 2015, is receiving high marks since he announced last year that TCF was exiting a volatile, California-based auto-loan business and redeploying capital into proven, consistent growers: leasing, equipment finance and inventory-finance lending.
Part of TCF’s secret sauce over the last few years has been fewer workers, a point little discussed publicly.
And it’s not the only big bank in the country that’s shrinking employment as it relies increasingly on automated relationships.
TCF employment has dropped 16 percent between 2012 and 2017, from 7,300 to 6,116 employees. Employment has dropped 9 percent in Minnesota during that time, from 3,000 to 2,741, according to company regulatory filings and information provided last week.
Wells Fargo, shedding businesses and employees as it copes with more than $1 billion in expenses and regulatory settlements over its consumer-banking scandals, has trimmed its Minnesota workforce by about 1,000 since 2012, to around 19,000.
U.S. Bancorp, on a long-term roll, said last week its Minnesota employment has increased from 11,200 to 13,500 over the last five years.
TCF has closed 119 branch offices in recent years. It has 315 remaining in several states.
It also has let go of an unspecified number of managers and employees from its three customer-contact centers, including one in Plymouth, in favor of a lower-cost strategy of adding 75 employees at the huge Genpact global consumer call center in the Philippines, according to a 2017 confidential presentation to TCF management. Genpact and other international call centers in the Philippines and India provide customer call and IT support for hundreds of big U.S. companies.
“TCF’s U.S.-based contact centers … in Plymouth, Sioux Falls and Chicago continue to serve our customers and deliver quality service,” Mark Goldman, a TCF executive, said last week. “We have not closed or transferred the work of these centers outside of the U.S. We did recently invest in additional capacity to serve our growing customer base with a contact center located in the Philippines.”
TCF is in a financial sweet spot. Its key businesses are growing. It’s able to raise rates on loan products faster than deposit interest rates, creating a fatter margin. A TCF investor presentation noted that employee compensation and other noninterest expenses have declined nearly 2 percent over the last year.
Goldman said in a telephone interview that the job swoon is temporary. The company, which has been investing heavily in consumer-banking technology, has nearly 400 jobs to fill.
The single biggest job reduction has occurred in recent months at its Orange County, Calif., used-auto lending business, which is running off its portfolio.
The company is reinvesting in its growing business services, consumer loan and residential mortgage businesses, including a recent small acquisition.
Goldman added that TCF this week will award pay increases of up to 16 percent to about 1,500 customer-relationship workers in branches, on top of annual raises, which reflects the company’s desire to reward and retain good performers.