In an effort to increase its presence in Michigan, Huntington Bancshares Inc. (HBAN) has partnered with Meijer to offer branch offices in several Meijer stores. An in-store banking agreement has been signed between Huntington and Meijer that will provide Huntington over 200 branches in Michigan. This reflects over 65% increase in branch offices and more than 500 job additions in the state.
Notably, Grand Rapids, Michigan-based retailer Meijer operates 197 supercenters and grocery stores throughout Michigan, Ohio, Indiana, Illinois and Kentucky.
The 10-year agreement will allow Huntington to set up full-service branches in several Meijer stores throughout Michigan in the years ahead. In the near term, i.e. from May through the end of the year 2012, new Huntington branches will be constructed in over 20 Meijer stores in Michigan. The company has also partnered with Steelcase Inc. (SCS), the office furniture provider, to design its new Meijer in-store branches.
We believe the deal is a strategic fit for Huntington given its intent to deepen its presence in the Michigan market. The company has also recently acquired Fidelity Bank in a Federal Deposit Insurance Corporation (:FDIC) assisted deal to boost its footprint in Southeast Michigan. The transaction adds over 18,000 Fidelity Bank customers to Huntington.
Besides augmenting its Michigan footprint, the deal also fits the company’s strategy of building its business on the in-store branch banking model. The company has already forayed into this domain by partnering with Giant Eagle Inc. for opening over 100 branches inside the latter’s stores in Ohio.
We believe that such efforts will help the company in gaining market share and thereby enhancing its profitability in the long run. Notably, following a turnaround phase after the break out of the financial crisis, Huntington is now focused on capitalizing on growth opportunities. Strategic initiatives are right on track.
Yet, a sluggish economic recovery and low interest rate environment coupled with regulatory issues will likely restrict robust earnings improvement in the upcoming quarters.
Huntington Bancshares shares maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation.
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