Huntington Bancshares Incorporated HBAN has been benefiting from rising loan balances, improving credit quality and strategic investments through mergers and acquisitions (M&A). However, significant exposure to commercial loans, along with rising expenses, is a concern.
Huntington has witnessed continued growth in deposit balance in the last few years. Also, loans improved backed by its commendable performance in the commercial and consumer portfolio. Management predicts average loans and leases to escalate about 3-4% on an annual basis, while average total deposits will likely be up 3-4%. The company is particularly focused on growing core deposits through acquiring core checking accounts and strengthening customer relationships.
Supported by its robust strong liquidity position, Huntington continues to expand through acquisitions. Over the past few years, the company has expanded its footprint on a number of acquisitions. In 2018, Huntington completed its acquisition of Hutchinson, Shockey, Erley & Co. — a leading public finance investment bank and broker-dealer — which resulted in a larger market presence.
Huntington’s non-interest expenses witnessed a CAGR of 8.3% over the last five years (ended 2019). The company is making investments in digital, data and technology enhancements that will bolster its existing capabilities and infrastructure. Therefore, a persistent uptrend in expenses is expected, which might limit the company’s profitability and operational efficiency. Notably, management expects expenses to flare up 1-3% this year.
Additionally, Huntington’s loan portfolio consists of nearly 50% of commercial loans. Such high exposure to commercial loans depicts lack of diversification, which can be risky for the company amid challenging economy and competitive markets.
Stocks to Consider
Some worth-considering stocks have been witnessing upward estimate revisions, including Farmers National Banc Corp. FMNB, MidWestOne Financial Group, Inc. MOFG and First Business Financial Services, Inc. FBIZ.
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