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Will Fee Income Growth Support Huntington (HBAN) Q1 Earnings?

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Huntington Bancshares HBAN is slated to report first-quarter 2021 results on Apr 22, before the opening bell. The company’s revenues and earnings are expected to have improved year over year.

In the last reported quarter, the bank’s earnings missed the Zacks Consensus Estimate. Higher credit provisioning and elevated expenses were the undermining factors. However, increase in revenues aided by high net interest and non-interest income supported the results.

The Zacks Consensus Estimate for first-quarter earnings of 33 cents indicates substantial growth from the year-ago reported number. Also, the consensus estimate for sales of $1.23 billion suggests a rise of 6% year over year.

Huntington Bancshares Incorporated Price and EPS Surprise

Huntington Bancshares Incorporated Price and EPS Surprise
Huntington Bancshares Incorporated Price and EPS Surprise

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

Key Factors at Play

Soft Net Interest Income (NII) Growth: The overall lending scenario was muted during the quarter, with commercial, industrial and real estate loan portfolios unlikely to have offered support. Also, as consumer sentiments remained subdued amid the coronavirus crisis, demand for consumer loans declined.

Further, the near-zero interest rates are likely to have hurt Huntington’s NII in the first quarter. This is likely to have resulted in a contraction in NIM.

Nevertheless, low deposit costs, steepening of the yield curve and higher average interest earning assets might have been offsetting factors. The Zacks Consensus Estimate for average interest earning assets of $112.8 billion for the quarter implies a nearly 10.8% year-over-year improvement.

The consensus estimate for NII (tax equivalent basis) indicates a 4.5% rise to $832 million.

High Non-Interest Revenues: Low mortgage rates during the quarter continued to fuel demand for refinancing and loan originations, thereby leading to higher mortgage banking income. The Zacks Consensus Estimate for same is pegged at $78 million, suggesting 34.5% growth.

Also, rise in deposits in the quarter is expected to have driven fees from service charge on deposits. Improved consumer spending is likely to have supported the company’s card fees. The Zacks Consensus Estimate for cards and payment processing revenues of $65 million suggests a 12.1% rise from the prior-year quarter. Further, the consensus estimate for insurance income is pegged at $25 million, indicating 8.7% growth.

Moreover, a substantial rise in client activity and higher market volatility supported trading revenues during the to-be-reported quarter. Investment banking performance also remained impressive due to strong equity markets. Thus, the company’s capital markets fees are likely to have witnessed growth. The Zacks Consensus Estimate of $35.4 million for the same suggests a 7.2% rise from the prior quarter.

Overall, the consensus mark for non-interest income of $398 million indicates a 10.2% year-over-year growth.

High Expenses: Despite expense control initiatives, investments in technology and marketing, as well as the return of customer and sales activity closer to pre pandemic levels, are likely to have resulted in higher expenses.

Asset Quality: Having built significant reserves in 2020 and considering the improvement in economic scenario, Huntington is likely to have released some provision for loan losses in the first quarter.

Further, non-performing loans might have declined. The Zacks Consensus Estimate for same of $525 million indicates fall of 10.4% from the prior-year quarter.

What Our Quantitative Model Reveals

Huntington has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Huntington is +1.73%.

Zacks Rank: Huntington currently sports a Zacks Rank of 3.

Other Banks Worth a Look

Here are a few other bank stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

T. Rowe Price Group TROW is scheduled to release earnings on Apr 29. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +0.57%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for New York Community Bancorp NYCB is +2.02% and it carries a Zacks Rank #2 at present. The company is slated to report quarterly numbers on Apr 28.

Carlyle Group CG is slated to report quarterly results on Apr 29. The company currently has an Earnings ESP of +3.12% and a Zacks Rank of 3.

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Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report

T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report

Carlyle Group Inc. (CG) : Free Stock Analysis Report

New York Community Bancorp, Inc. (NYCB) : Free Stock Analysis Report

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