On Feb 27, we reiterated our Neutral recommendation on Huntington Bancshares Inc. (HBAN) based on its rising revenues and healthy capital position. However, pressurized net interest margin, rising expenses and unsettling macro economic issues remain the major causes of concern. Huntington retains a Zacks Rank #3 (Hold).
Huntington’s fourth quarter 2012 earnings came in at 19 cents per share, beating the Zacks Consensus Estimate by a couple of cents. Total revenue, on a fully-taxable-equivalent (FTE) basis, came in at $737.2 million, up 14% from the year-ago quarter.
Moreover, revenues surpassed the Zacks Consensus Estimate of $702 million. Further, Huntington has delivered an average earnings surprise of 14.6% last year.
Moreover, over the last 60 days, the Zacks Consensus Estimate for 2013 hiked only by a penny. Further, opportunistic acquisitions as well as robust inorganic growth have helped the company sustain the Neutral recommendation. Extensive capital deployment activities also continue to reinforce investors’ confidence in the stock.
However, the low interest rate environment and changing regulatory landscape are expected to pressurize the net interest margin in the subsequent quarters. Further, given the sluggish market recovery, we expect any significant improvement in top line – in the foreseeable future – to remain elusive.
In addition, we remain wary of the continuously rising operating expenses. The company is trying to rein in costs and has undertaken several measures in 2012. However, we do not anticipate cost-trimming initiatives to fully control the rising costs as the company continues to expand globally, which involve numerous regulatory and legal expenses.
Other Stocks to Consider
Other banking stocks that are currently performing well include First Defiance Financial Corp. (FDEF), Bank Mutual Corp. (BKMU) and Meta Financial Group, Inc. (CASH). All these companies carry a Zacks Rank #1 (Strong Buy).
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