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Community bankers emerged victorious Tuesday after regulators made a number of key changes to a final package of Basel III capital rules in an effort to address smaller institutions' concerns. But the biggest banks, in contrast, fared far worse.
July 2 -
TCF, the Wayzata, Minn., bank recorded a $20 million charge in response to new regulatory requirements for loans to homeowners who have been through bankruptcy. The directive has hurt profits at a slew of banks.
October 26 -
The head of TCF Financial Corp., which sued the Federal Reserve Board in October to challenge its debit card interchange fee caps, said growing opposition to the proposal may help his case.
January 20
William Cooper has had his share of run-ins with regulators over the years, but TCF Financial's chairman and chief executive offers nothing but praise for the Basel Committee and the Consumer Financial Protection Bureau.
In a conference call with analysts Tuesday, Cooper lauded the Basel Committee on Banking Supervision for writing new capital rules that he believes will ultimately help the $18.3 billion-asset TCF (TCB) and other small and regional banks better compete against larger banks.
He also broke ranks with many of his fellow bankers in saying that he respects the work of the CFPB. In his view, the agency bankers love to hate has actually been sensitive to banks' concerns when conducting examinations and establishing new rules and is not the "boogeyman" it has been made out to be.
The agency is "doing logical things and not the illogical things that people were afraid of," Cooper said during the bank's second-quarter earnings call.
Cooper, a onetime Detroit police officer, is known as a straight shooter and has never been shy about calling out policymakers for implementing regulation he sees as misguided. He famously sued the Federal Reserve in 2010 to try to block the implementation of the provision in the Dodd-Frank Act that caps interchange fees on debit card transactions. (The suit was later dropped.)
A year earlier, he said at an industry conference that
"I believe at least 90% of this crisis was government driven, created by the government through bad monetary policy, the wrong kind of regulation, the whole impetus for managing the economy, lending to the poor, encouraging what was in effect bad lending," Cooper said in 2009.
There were no such rants on Tuesday's earnings call. While Cooper has long maintained that the relatively fixed costs of regulation put small banks at a disadvantage, he believes the new Basel III rules which require the largest banks to hold more capital will "level the playing field."
"These are big things for the banking industry; the way [the rules] have come down are a big positive for regional banks," he said.
Speaking about his Wayzata, Minn., bank, Cooper said, "We play in national markets in a lot of our loan categories" and the changes in capital requirements "will make TCF even more competitive than it has been in the past."
As for CFPB exams, Cooper said he believes his fellow bankers have little to fear. "The examination process has been a much more logical and worthwhile process than a lot of people thought," he said.
For the quarter that ended June 30, TCF reported a profit of $34.1 million, 8% higher than the second quarter of 2012. Per-share earnings were 21 cents, meeting the expectations of analysts polled by Bloomberg.
The gain was driven largely by improved credit quality, which helped offset declines in interest and fee revenue.
The bank lowered its provision for loan losses by 40%, to $32.6 million, as net chargeoffs dropped 38%, to $27.7 million. The company attributed both declines largely to smaller losses on consumer real estate and commercial loans.
Net interest income rose by 2%, to $202 million, as lower borrowing and deposit costs offset shrinking loan revenue. Net interest margin tightened by 14 basis points, to 4.72%.
TCF's reintroduction last year of free checking contributed to a 12% decline in noninterest income, to $99.8 million. Fee and service charge revenue dropped 14%, to $41.6 million, and card and ATM revenue also slid. Increased loan sales partially made up for the decline in deposit-related fee income.
But the return of free checking helped boost its deposits 8.2%, to $14.1 billion, year over year.
TCF's shares were up 1.8% in trading Tuesday afternoon, to $16.14. Year to date, the company's stock has risen 27%.
Chris Cumming contributed to this story.
