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Huntington (HBAN) Q3 Earnings Beat Estimates, Revenues Up

Zacks Equity Research

Huntington Bancshares HBAN delivered third-quarter 2019 positive earnings surprise of 3%. Earnings per share of 34 cents surpassed the Zacks Consensus Estimate by a penny. The bottom line also came in 10% higher than the prior-year quarter’s reported figure.

Results were supported by higher net interest income and fee income. Rise in loans was a driving factor. However, results were adversely impacted by rise in operating expenses and higher provisions for credit losses. Also, contraction of margin posed a headwind.

The company reported net income of $372 million for the quarter, down 1.6% year over year.

Revenues & Loans Improve, Expenses Rise

Total revenues increased 4% year over year to $1.19 billion. Further, the top line outpaced the Zacks Consensus Estimate of $1.17 billion.

Net interest income (FTE basis) was $805 million, down 1% from the prior-year quarter. Also, net interest margin contracted 12 basis points to 3.20%.

Non-interest income climbed 14% year over year to $389 million. This upsurge mainly stemmed from increase in almost all components of income, partly muted by lower bank-owned life insurance income and gain on sale of loans and leases.

Non-interest expenses jumped 2% to $667 million. This was chiefly due to higher personnel costs, net occupancy and equipment costs, outside data processing and other service costs along with other expenses.

Efficiency ratio was 54.7%, up from the prior-year quarter’s 55.3%. A rise in ratio indicates fall in profitability.

As of Sep 30, 2019, average loans and leases at Huntington inched up slightly on a sequential basis to $75.1 billion. Also, average core deposits increased marginally from the prior quarter to $79.3 billion.

Credit Quality Disappoints

Net charge-offs were $73 million or an annualized 0.39% of average total loans in the reported quarter, up from the $29 million or an annualized 0.16% recorded a year ago. Also, quarter-end allowance for credit losses increased 3% to $884 million.

Provision for credit losses went up 54.7% on a year-over year basis to $82 million. In addition, total non-performing assets totaled $482 million as of Sep 30, 2019, up 19.6%.

Capital Ratios

Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 10.02% and 11.41%, respectively, compared with 9.89% and 11.33% reported in the year-ago quarter.

Tangible common equity to tangible assets ratio was 8%, up from 7.25% as of Sep 30, 2018.

Capital Deployment

During the September quarter, the company repurchased 5.2 million shares at an average cost of $13.02 for a total cost of $68 million.

Our Viewpoint

Huntington reported a decent quarter. The company, which has a solid franchise in the Midwest, is focused on capitalizing on growth opportunities. Furthermore, it exhibits continued efforts in increasing loan and deposit balances, fueling revenue growth. Nevertheless, higher expenses and provisions are concerns.

Huntington Bancshares Incorporated Price, Consensus and EPS Surprise

Huntington Bancshares Incorporated Price, Consensus and EPS Surprise

Huntington Bancshares Incorporated price-consensus-eps-surprise-chart | Huntington Bancshares Incorporated Quote

Currently, Huntington carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Synovus Financial’s SNV reported third-quarter 2019 adjusted earnings of 97 cents per share lagging the Zacks Consensus Estimate of $1. However, the bottom line was 2.9% higher than the prior-year quarter figure.

Reflecting top-line strength, Northern Trust Corporation’s NTRS third-quarter 2019 earnings per share of $1.69 outpaced the Zacks Consensus Estimate of $1.64. Also, the earnings figure compares favorably with the year-ago quarter’s $1.58.

Regions Financial Corporation RF reported third-quarter 2019 adjusted earnings of 39 cents per share, in line with the Zacks Consensus Estimate. Earnings were up 5.4% year over year.

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