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Huntington (HBAN) Poised for Growth: Should You Hold?

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·3 min read
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On Mar 3, we issued an updated research report on Huntington Bancshares Incorporated HBAN. The company continues to gain from organic and inorganic growth strategies, rising loans and deposits balances, while shrinking margins due to a low-rate environment and lack of loan portfolio diversification remain near-term headwinds.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised 7.8% upward, over the past 30 days. The stock currently carries a Zacks Rank #3 (Hold).

Shares of Huntington have surged 60.4% in the past six months, outpacing 46.3% growth for the industry.

The company has witnessed continued organic growth in the past few years. Also, it is focused on achieving the best deposit franchise, with the deposit balance increasing at a compound annual growth rate (CAGR) of 8% over the three-year period ended 2020. Moreover, loans improved backed by its commendable performance in the commercial and consumer portfolio at a three-year CAGR of 4.4% in 2020. We believe both loan and deposit balances are poised to improve in an improving economy.

Driven by a strong liquidity position, Huntington has been able to expand via a couple of mergers and acquisitions over the past couple of years, the latest being the deal announced in December 2020 to acquire TCF Financial to form one of the top 10 regional banks in the nation. We anticipate these initiatives to support its performance and help gain market share in the days to come.

However, the company’s bottom-line growth remains affected, thanks to the pressure on margins due to the prevailing low interest-rate environment. In addition, a rising expense base due to investments in digital, data and technology refinements, product differentiation and other initiatives might disrupt its profitability.

Further, a bulk of Huntington’s loan portfolio – nearly 52% as of Dec 31, 2020 – comprises total commercial loans. Such a lack of diversification can be precarious for the company amid a challenging economy.

Stocks to Consider

Better-ranked stocks in the financial space include Associated Bancorp ASB and UMB Financial Corporation UMBF, sporting a Zacks Rank #1 (Strong Buy), and Civista Bancshares, Inc. CIVB carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Associated Bancorp’s 2021 earnings estimate has been revised 6.8% upward, over the last seven days. Further, its shares have appreciated 48.7% in the past six months.

UMB has witnessed an 18.2% upward earnings estimates revision for the current year, in the past 30 days. Moreover, its shares have gained 60.4% in the past six months.

Civista Bancshares’ earnings estimate moved 0.6% north for the ongoing year, in the past 30 days. Also, its share price has rallied 53% in six months’ time.

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