Tuesday, FBR Capital Markets reiterated TCF Financial Corp. (TCB) stock at Underperform rating with a price target of $14. The brokerage lowered its fiscal 2010 core EPS estimate to $0.72 from $0.75, and its 2011 estimate to $1.20 from $1.25.
Analyst David Rochester lowered his normalized EPS range to $1.40-$1.70 from $1.50-$1.80 to reflect the announced common raise. The analyst views the additional capital as a positive, providing further cushion against potential credit losses and better positioning the company to take advantage of growth opportunities, which could come in the form of more portfolio acquisitions.
While the analyst likes the franchise and believes there is material value in the low-cost core deposit base, he ultimately concludes that although he sees longer-term potential in the shares, he does not expect upside to be as material as that for the more beaten up regional banks trading at or below TBV/share, which are expected to lose money in 2010 but make money in 2011.
The analyst remains cautious on the prospects for relative share returns over the next year in a protracted recovery scenario, as TCB is a liability-sensitive bank, generally not interested in FDIC-assisted opportunities, will likely be the most adversely impacted by the new opt-in regulations for overdraft fees, is still experiencing material increases in TDRs and problem loans, and is already trading at a strong premium to TBV/share.
The analyst also noted that were the magnitude of the impact of deposit fee regulation to be greater than expected, his normalized EPS range could easily fall to the lower end of his range, as he is modeling for at least a $1.00 contribution from overdraft fees to this EPS range in his normalized year.
Currently, TCB is up $0.21 or 1.46% and trading at $14.60.
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