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Balanced Risk-Reward for Huntington

Zacks Equity Research

On May 7, 2014, we issued an updated research report on Huntington Bancshares Incorporated (HBAN). This commercial and consumer banking services provider recently reported impressive first-quarter 2014 results.

Results were aided by top-line growth and lower provision for credit losses. Further, loan and deposit balances exhibited growth. However, the quarter witnessed higher expenses. Though the company shows stability in its fundamentals, we remain cautious due to the current economic uncertainty across the industry.

Huntington reported first-quarter 2014 adjusted earnings of 19 cents per share, beating the year-ago quarter earnings by 11.76%.

We view Huntington as a sound asset for yield-seeking investors. In Mar 2014, the company’s 2014 Capital Plan got the Federal Reserve’s approval. The plan included a 20% increase in the common stock dividend and the repurchase of up to $250 million of common stock. Huntington’s proposed capital actions represent an 11% increase in the capital return to shareholders from the prior year. Such a shareholder-friendly approach will boost investors’ confidence in the stock.

Given its robust liquidity position, Huntington is well positioned to expand via acquisitions. During first-quarter 2014, the company completed the acquisition of Camco Financial which should fortify its presence in several existing operational locations and help it to expand into new areas with substantial growth potential. Further, Huntington is set to strengthen its Michigan branch network by acquiring 11 branches in central and east Michigan from Bank of America Corp. We believe that such efforts will help the company gain significant market share and thereby enhance its profitability in the long run.

Despite strong fundamentals, we believe there are certain issues that may pressurize the company’s financials in the near term. These include absence of credible improvement in the mortgage market, declining net interest margin due to a low interest rate environment, increased cost structure and the prevailing stringent regulatory landscape.

Following the first-quarter results, the Zacks Consensus Estimate over the past 30 days declined around 1.4% to 71 cents per share for 2014. Also, the same for 2015 dipped about 1.3% to 77 cents per share, over the same time frame.

Huntington currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better-ranked Midwest banks include Chemical Financial Corporation (CHFC), MidWest One Financial Group, Inc. (MOFG) and First Citizens Banc Corp. (FCZA). While Chemical Financial and MidWest One Financial sport a Zacks Rank #1 (Strong Buy), First Citizen Banc carries a Zacks Rank #2 (Buy).

Read the Full Research Report on HBAN
Read the Full Research Report on CHFC
Read the Full Research Report on MOFG
Read the Full Research Report on FCZA

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