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Why Huntington Bancshares Incorporated (NASDAQ:HBAN) May Not Be As Risky Than You Think

Gerald Huddleston

Post-GFC recovery has strengthened economic growth and credit quality, benefiting large banks such as Huntington Bancshares Incorporated (NASDAQ:HBAN), with a market capitalisation of US$16.26B. A borrower’s demand for, and ability to repay, loans is driven by economic growth which directly impacts the level of risk Huntington Bancshares takes on. With stricter regulations as a result of the GFC, banks are more conservative in their lending practices, leading to more prudent levels of risky assets on the balance sheet. The level of risky assets a bank holds on its accounts affects the attractiveness of the company as an investment. So today we will focus on three important metrics that are insightful proxies for risk. Check out our latest analysis for Huntington Bancshares

NasdaqGS:HBAN Historical Debt Apr 24th 18

What Is An Appropriate Level Of Risk?

If Huntington Bancshares does not engage in overly risky lending practices, it is considered to be in good financial shape. Generally, loans that are “bad” and cannot be recovered by the bank should make up less than 3% of its total loans. Bad debt is written off as expenses when loans are not repaid which directly impacts Huntington Bancshares’s bottom line. Since bad loans only make up a very insignificant 0.5% of its total assets, the bank exhibits very strict bad loan management and is exposed to a relatively insignificant level of risk in terms of default.

Does Huntington Bancshares Understand Its Own Risks?

Huntington Bancshares’s ability to forecast and provision for its bad loans indicates it has a good understanding of the level of risk it is taking on. If the level of provisioning covers 100% or more of the actual bad debt expense the bank writes off, then it is relatively accurate and prudent in its bad debt provisioning. Given its high bad loan to bad debt ratio of 197.99% Huntington Bancshares has cautiously over-provisioned 97.99% above the appropriate minimum, indicating a safe and prudent forecasting methodology, and its ability to anticipate the factors contributing to its bad loan levels.

How Big Is Huntington Bancshares’s Safety Net?

Handing Money Transparent

Huntington Bancshares profits from lending out its various forms of borrowings and charging interest rates. Deposits from customers tend to carry the lowest risk due to the relatively stable interest rate and amount available. The general rule is the higher level of deposits a bank holds, the less risky it is considered to be. Since Huntington Bancshares’s total deposit to total liabilities is very high at 82.51% which is well-above the prudent level of 50% for banks, Huntington Bancshares may be too cautious with its level of deposits and has plenty of headroom to take on risker forms of liability.

Next Steps:

Huntington Bancshares exhibits prudent management of risky assets and lending behaviour with sensible levels for all three ratios. It has maintained a sufficient level of deposits against liabilities and reasonably provisioned for the level of bad debt. The company’s judicious lending strategy gives us higher conviction in its ability to manage its operational risks which makes Huntington Bancshares a less risky investment. Today, we’ve only explored one aspect of Huntington Bancshares. However, as a potential stock investment, there are many more fundamentals you need to consider. There are three key aspects you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for HBAN’s future growth? Take a look at our free research report of analyst consensus for HBAN’s outlook.
  2. Valuation: What is HBAN worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether HBAN is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.