New York, January 06, 2011 -- Moody's Investors Service downgraded the ratings of TCF National
Bank (TCF) and TCF Capital I. The bank's ratings were lowered
to A2 from A1 for long-term deposits and to C+ from B-
for unsupported bank financial strength. TCF's short-term
rating was affirmed at Prime-1. The rating on trust preferred
securities issued by TCF Capital I was lowered to Baa2 from Baa1.
TCF's parent, TCF Financial Corporation, is unrated.
Following the rating action, the outlook on TCF's ratings
is stable.
RATINGS RATIONALE
The one notch downgrade reflects two specific challenges related to TCF's
concentration risks: 1) TCF's consumer-driven fee revenue,
and therefore, the bank's profitability, is likely to
be reduced by recent government initiatives, and 2) TCF has significant
exposure to residential real estate, which will keep its credit
costs elevated in the intermediate-term, in Moody's
view.
Regarding TCF's fee revenue, much of it flows from products
and services tied to the bank's comparatively large base of consumer
checking accounts. Those products, such as debit cards,
have historically generated significant income for TCF. However,
recent regulatory and legislative focus on certain fees, specifically
debit interchange and overdraft fees, have the potential to materially
reduce TCF's pre-provision income, even though TCF
can likely offset some of the impact through other service charges.
Moody's notes that TCF has sued the Federal Reserve over its ability
to regulate debit interchange fees, but the outcome of that lawsuit
is not yet known. Even if TCF is successful, Moody's
believes that TCF's fee income, largely tied to consumer financial
services, may remain under regulatory pressure.
While facing these revenue pressures, TCF's primary asset
concentration, consumer residential real estate loans, remains
problematic, which is reflected in elevated levels of non-performing
assets. Moreover, given continued pressure on home prices,
Moody's believes that TCF's credit costs could remain somewhat
high in 2011. In contrast, a number of TCF's U.S.
regional peers have experienced an improving trend in their credit metrics,
which has somewhat weakened TCF's relative standing. Nonetheless,
in the context of TCF's healthy capital profile, its residential
real estate exposures are manageable.
Following the downgrade, the rating agency's outlook on TCF
is stable given its ample capital base that would allow the bank to absorb
higher than anticipated credit losses, and since its pre-provision
profitability should remain reasonably healthy and in line with peers
even though its fee income may be permanently impaired.
The last rating action on TCF was on March 12, 2009, when
Moody's changed TCF's outlook to negative from stable.
The principal methodologies used in this rating were Moody's "Bank Financial
Strength Ratings: Global Methodology", published in February
2007, and "Incorporation of Joint-Default Analysis into Moody's
Bank Ratings: A Refined Methodology", published in March 2007.
TCF Financial Corporation, headquartered in Wayzata, Minnesota,
reported assets of $18.3 billion at September 30,
2010.
Downgrades:
..Issuer: TCF Capital I
....Preferred Stock Preferred Stock,
Downgraded to Baa2 from Baa1
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: TCF National Bank
.... Bank Financial Strength Rating,
Downgraded to C+ from B-
.... Issuer Rating, Downgraded to A2
from A1
....OSO Senior Unsecured OSO Rating,
Downgraded to A2 from A1
....Subordinate Regular Bond/Debenture,
Downgraded to A3 from A2
....Senior Unsecured Deposit Rating,
Downgraded to A2 from A1
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Allen H. Tischler
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Robert Young
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades TCF (bank deposits to A2); outlook stable
