Chemical Financial Seeing Decent Growth, But There's Still Work To Do

Michigan’s Chemical Financial (CHFC) has been doing alright. The shares had basically been tracking the regional bank indices on a year-to-date basis, but still outperforming on a full-year basis, and second quarter results should have investors feeling reasonably good about the near-term growth prospects. In addition to decent loan growth, Chemical Financial announced that it won the banking business of the city of Detroit, a relationship that should bring in around $500 million of lower-cost deposits that the bank can use.

I’m a little concerned about the jump in provisions, but Chemical Financial’s credit is still healthy on balance. I’m also a little concerned about the company’s fairly weak spread leverage – while Chemical’s cumulative deposit beta remains low, so too is the cumulative loan beta. There still appears to be some upside on the basis of high single-digit earnings growth and a high-teens ROTCE, and Chemical Financial does have the option to use further M&A to drive more growth.

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Chemical Financial Seeing Decent Growth, But There's Still Work To Do