What's in the Offing for Huntington (HBAN) in Q3 Earnings?
Huntington Bancshares HBAN is slated to report third-quarter 2022 results on Oct 21, 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 recorded an earnings surprise of 5.9%. Results reflected full-quarter benefits from the TCF acquisition completed in June 2021. Strength in fee income and net interest income (“NII”) drove the top line.
Huntington has a mixed earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two and lagged the same in the other two of the trailing four quarters, the average beat being 0.91%.
Huntington Bancshares Incorporated Price and EPS Surprise
Huntington Bancshares Incorporated price-eps-surprise | Huntington Bancshares Incorporated Quote
The Zacks Consensus Estimate for third-quarter earnings of 38 cents has been revised downward over the past week, reflecting the bearish sentiments of analysts. Nonetheless, the figure indicates an 8.6% rise from the year-ago reported number. The consensus estimate of $1.84 billion for revenues suggests a year-over-year increase of 8.2%.
Key Factors at Play
Loans: While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. This is likely to have aided Huntington’s third-quarter performance, as the majority of its loan portfolio comprises commercial loans.
The Zacks Consensus Estimate of $162.6 billion for average interest-earning assets in the quarter implies a marginal improvement on a sequential basis.
NII: The overall lending scenario continued to improve in the third quarter. Also, the Federal Reserve raised short-term rates by 150 basis points in the quarter. The company has been dynamically managing its balance sheet to increase asset sensitivity. Hence, boosted by higher short-term rates, improvement in the lending scenario and increased average earning assets, the company’s asset yields, NIM and NII are anticipated to have been bolstered.
The consensus estimate for NII indicates a 4.9% rise to $1.32 billion from the prior quarter’s reported figure.
Non-Interest Revenues: Mortgage originations, both purchase and refinancing, continued to decline in the third quarter. Also, in the third quarter, mortgage rates increased, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has taken a toll on the origination market. This is expected to have affected the company’s mortgage banking net revenues.
Mortgage banking fees for the to-be-reported quarter are estimated to be $38.3 million, suggesting a 13% dip on a sequential basis.
In June 2022, Huntington completed the acquisition of Capstone Partners, an IB firm. The acquisition has enhanced the complementary capabilities of Huntington’s capital market business. In May 2022, the company acquired Torana to enhance its digital capabilities and enterprise payment strategy. The acquisitions are expected to have aided capital market fees. The Zacks Consensus Estimate for capital market fees is pegged at $81 million, indicating a 50% increase from the prior quarter’s reported figure.
The consensus mark of $102 million for non-interest income indicates a 6.3% sequential rise. Trust service revenues of $64 million indicate a marginal sequential increase.
The consensus mark of $522 million for non-interest income suggests a 7.6% sequential rise.
Expenses: Huntington’s investments in digital capabilities, marketing and hiring personnel to aid its revenue growth are anticipated to have raised its costs. Also, the Capstone and Torana acquisitions are anticipated to have increased expenses in the quarter under review.
Asset Quality: With loan growth, expectations of a worsening macroeconomic outlook and growing recession fears, HBAN is likely to have set aside more money to cover expected loan losses in the third 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 this time around.
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 +0.72%.
Zacks Rank: Huntington currently has a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks Worth a Look
A few other finance stocks, which you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp ASB and BankUnited BKU.
Associated Banc-Corp is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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