Profits at the state’s No. 3 bank jumped 50 percent from last year, but slipped a bit from the previous quarter, so it’s cutting costs.
Two years after TCF Financial Corp. underwent a major financial restructuring and started diversifying into areas such as auto financing, the bank is embarking on a new cost-savings project.
The Wayzata-based lender said Wednesday that it’s closing eight bank branches in Minnesota by the end of March. All are located at Cub supermarkets outside the core metro area, the bank said, and most are near other TCF locations.
In December, the bank said it was shuttering 37 Chicago-area branches inside Jewel supermarkets, as well as a branch in downtown Minneapolis, and adding 52 new ATMs in Chicago “L” train stations. The additional eight closings announced Wednesday bring the total chop to 46.
“There’s probably some more things to come in that, not only in the branch system but other areas in the bank as well,” TCF CEO Bill Cooper said in a conference call with analysts Wednesday.
The Minnesota branches being shuttered are in Hastings, Forest Lake, Northfield, Rogers, Chanhassen, Lakeville South, Elk River and west Mankato.
The branch strategy is more about pruning, executives said, adding that TCF is not backing away from its long-standing strategy of placing branches in Jewel and Cub supermarkets. Cub Foods remains an important partner, the bank said.
The closings cost the bank $9 million in the fourth quarter and shaved about 3 cents per share off earnings. The cuts were disclosed in the company’s fourth-quarter earnings release.
Overall, fourth-quarter profits jumped nearly 50 percent from a year ago to $35 million, or 22 cents per share, missing the consensus Wall Street estimate by a penny.
Driving the growth were gains on investments and sales of consumer real estate and auto loans and on the sale of a single commercial loan. The gains offset year-over-year declines in fees and service charges, and in leasing and equipment finance.
For the year, TCF had profits of $132.6 million compared with 2012’s $218.5 million loss when the bank repositioned its balance sheet.
TCF is among the banks and credit unions smacked by the Target Corp.’s data security breach as customers flocked to get information about their accounts and get new debit and credit cards.
Responding to an analyst’s question about it, Cooper pointed the finger at the Durbin Amendment. In 2010, TCF unsuccessfully sued the federal government over the regulation, which capped interchange swipe fees on debit card transactions, and stuck a knife in TCF’s business model.
Cooper said the amendment has unfairly penalized banks, which bear the brunt of costs for payment card fraud.
“It really shows the incorrectness of the Durbin amendment, which largely resolved around who pays fraud costs and fraud prevention,” Cooper said. “The retailers got about $20 billion of additional revenue in that thing. It’s pretty clear that they didn’t spend it on fraud prevention.”
“As you can tell I’m a little irritated by the whole thing,” he added, “… as to why I’m paying for the breach of retailers around the country.”
Cooper said that regulators have required banks to tighten their computer networks and practices to address fraud, but that retailers lack the same strong controls.
“I feel like the rest of the industry has potentially some very big holes in it,” he said.
Jennifer Bjorhus • 612-673-4683