TCF Eyes Canada for Commercial Finance Growth

By Davis, Paul | American Banker, June 24, 2008 | Go to article overview

TCF Eyes Canada for Commercial Finance Growth


Davis, Paul, American Banker


TCF Financial Corp. of Wayzata, Minn., is looking to Canada in a bid to expand its commercial finance operations.

The $16.4 billion-asset TCF has filed an application with the Federal Reserve Board to form a so-called Edge corporation, which would allow it to conduct international banking. The June 13 application said TCF Commercial Finance Canada Inc. would focus on inventory acquisition financing to retailers.

TCF did not return calls. In April, Lynn Nagorske, its chief executive, voiced support for its leasing and equipment finance business, despite credit deterioration that hampered the unit's first-quarter profit.

Profit in the division fell 23.9% from a year earlier, to $6.7 million, despite a 20-basis-point improvement in the average yield for leasing and equipment finance assets. The unit's $3.7 million provision for loan losses in the first quarter compared to $5.3 million for all of 2007. Net chargeoffs were $2.1 million, or 0.39% of average loans and leases, in the quarter, versus $3.9 million, or 0.2%, in the 12 months of 2007. (TCF's highest concentrations of leasing and equipment finance assets are in California, at 12.8% at the end of last year, and Florida, at 6.5%.)

However, the unit accounted for 14.1% of TCF's first-quarter earnings, up from 10.7% a year earlier.

Mr. Nagorske downplayed the profit decline, and during an April 22 earnings conference call he described the business as "lumpy in nature." On March 31 TCF's pipeline of such loans was up 19% from a year earlier, to $407 million, he said. "I wouldn't read too much into one quarter of decline," he said.

Kenneth E. Bentson Jr., the president of the Equipment Leasing and Finance Association, said it is not surprising to see companies such as TCF target Canada, because cross-border finance "is doing quite well," though he said a number of the association's members are feeling "some pressure" in the United States from deteriorating asset quality. …

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