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Huntington (HBAN) Q1 Earnings Meet Estimates, Costs Fall

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Huntington Bancshares HBAN reported first-quarter 2018 earnings per share of 28 cents, in line with the Zacks Consensus Estimate. However, the figure came in higher than the prior-year quarter adjusted earnings of 21 cents.

Results were driven by higher revenues and lower provisions. Continued growth in both loan and deposit balances was also recorded. Moreover, lower expenses were the primary tailwinds.

Net income surged nearly 28.3% year over year to $326 million during the quarter.

Revenues, Loans & Deposits Escalate, Expenses Drop

The company’s total revenues on a fully taxable-equivalent (FTE) basis came in at $1.09 billion in the quarter, missing the Zacks Consensus Estimate of $1.10 billion. However, total revenues were up 3% year over year.

Net interest income (NII) came in at $777 million on a FTE basis, up 5% from the prior-year quarter. The rise was driven by an increase in average earnings assets.  Net interest margin (NIM) remained unchanged at 3.30%.

Non-interest income inched up 1% year over year to $314 million. The upsurge mainly stemmed from growth in capital-market fees, cards and payment processing income, along with trust and investment-management services.

Adjusted non-interest expense declined slightly to $633 million on a year-over-year basis. The decrease stemmed from a fall in almost all components of expenses, partially offset by rise in personnel costs. Including the impact of certain non-recurring items, non-interest expense dropped 10% year over year.

As of Mar 31, 2018, average loans and leases at Huntington jumped nearly 5% year over year to $70.5 billion. Also, average total deposits ascended 1% year over year to $76.9 billion.

Credit Quality Marks Improvement

Net charge-offs were $38 million or an annualized 0.21% of average total loans in the reported quarter, down from $39 million or an annualized 0.24% recorded in the year-ago quarter.

Provision for credit losses was down 2.9% on a year-over year basis to $66 million. In addition, total non-performing assets totaled $420 million as of Mar 31, 2018, down from $458 million as of Mar 31, 2017.

Further, the quarter-end allowance for credit losses, as a percentage of total loans and leases, edged down to 1.13% from 1.14% in the year-earlier quarter.

Strong Capital Ratios

Huntington Bancshares’ capital ratios remained strong.

Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 10.51% and 11.99%, respectively, as compared with 9.74% and 13.26% reported in the year-ago quarter.

Tangible common equity to tangible assets ratio was 7.70%, up from 7.28% as of Mar 31, 2017.

Outlook for 2018

With improving macroeconomic environment and the company’s accomplishment of its core strategies, total revenues for full-year 2018 are projected to be up in the range of 4-6%. Non-interest expense is anticipated to be down 2-4%.

The NIM for 2018 is estimated to remain flat as compared with the prior year, on a GAAP basis, as expansion in NIM might offset the reduced benefit of purchase accounting. Further, efficiency ratio is projected at 55-57%.

Management predicts average loans and leases to increase in the 4-6% band on an annual basis, while average deposits are expected to be up 3-5%.

Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current low level of problem assets and credit costs.

Management anticipates NCOs to remain below the long-term normalized range of 35-55 basis points.

The effective tax rate for 2018 is estimated in the range of 15.5-16.5%.

Our Viewpoint

Huntington reported an encouraging quarter. The company, which has a solid franchise in the Midwest, is focused on capitalizing on its growth opportunities. Furthermore, it exhibits consistent efforts in increasing loan and deposit balances, aiding revenue growth. Additionally, we remain optimistic about the company’s several strategic actions, including acquisitions and consolidation of branches.

Further, declining costs and stable credit metrics act as tailwinds for its financials.

Huntington Bancshares Incorporated Price, Consensus and EPS Surprise

Huntington Bancshares Incorporated Price, Consensus and EPS Surprise | Huntington Bancshares Incorporated Quote

Currently, Huntington carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

People's United PBCT reported net earnings of 30 cents per share in the first quarter, in line with the Zacks Consensus Estimate. The reported figure improved 36.4% year over year. Rising rates and higher fee income supported results. Growth in loan and deposit balances reflected organic growth. However, elevated expenses and provisions remained major drags.

Driven by top-line strength, Texas Capital Bancshares Inc. TCBI reported a positive earnings surprise of around 0.7% in first-quarter 2018. Earnings per share of $1.38 outpaced the Zacks Consensus Estimate by a penny. Additionally, results compared favorably with 80 cents recorded in the prior-year quarter. Results were driven by rise in revenues. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses and provisions remained the undermining factors.

M&T Bank MTB reported net operating earnings of $2.26 per share in first-quarter 2018. The bottom line improved 5.1% year over year. In addition, top-line growth was recorded. Moreover, improved credit quality was a positive factor. Further, pressure on margin eased. However, decrease in loan and deposit balances was a headwind. Also, results were affected by higher expenses.

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