8-K/A: Huntington Bancshares Reports Mixed Q1 2024 Results Amidst Deposit and Loan Growth

Huntington Bancshares reported first-quarter 2024 earnings with increased EPS compared to the prior quarter but decreased year-over-year, alongside sustained deposit and loan growth.

Summary

• Huntington Bancshares Incorporated announced a net income of $419 million, or $0.26 per common share, for the first quarter of 2024.
• This represents an increase of $176 million, or $0.11 per share, from the previous quarter, but a decrease of $183 million, or $0.13 per share, compared to the same quarter last year.
• Adjusted earnings per common share were $0.28, excluding a $0.02 per share impact from notable items, primarily the FDIC Deposit Insurance Fund special assessment.
• Net interest income decreased by $29 million, or 2%, from the prior quarter and $122 million, or 9%, from the year-ago quarter.
• Noninterest income increased by $62 million, or 15%, from the prior quarter, reaching $467 million, although it decreased by $12 million when excluding the impact of mark-to-market on pay-fixed swaptions.
• Average total deposits increased by $1.1 billion, or 1%, from the prior quarter and $4.6 billion, or 3%, from the year-ago quarter.
• Ending total deposits increased by $2.0 billion, or 1%, from the prior quarter and $7.9 billion, or 5%, from the year-ago quarter.
• Average total loans and leases increased by $701 million, or 1%, from the prior quarter to $121.9 billion, and increased $1.5 billion, or 1%, from the year-ago quarter.
• The net charge-off rate was 0.30% of average total loans and leases for the quarter.
• The nonperforming asset ratio was 0.60%.
• The allowance for credit losses (ACL) was $2.4 billion, or 1.97% of total loans and leases, at the end of the quarter.
• The Common Equity Tier 1 (CET1) risk-based capital ratio remained stable at 10.2%.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to growth in deposits and loans, but tempered by the decrease in net interest income and year-over-year EPS decline. The company's forward-looking statements are optimistic, but the current results show mixed performance.

Positives

• Earnings per share increased by $0.11 compared to the previous quarter.
• Noninterest income saw a significant increase of 15% compared to the previous quarter.
• Average total deposits and ending total deposits both showed growth compared to both the previous and year-ago quarters.
• Average total loans and leases increased by 1% from the prior quarter.
• Huntington received 7 awards from Coalition Greenwich for 2023 in Excellence and Best Brand for both middle market and business banking.
• Huntington was recognized by Newsweek as one of America's 500 Most Responsible Companies for the fifth consecutive year.

Negatives

• Earnings per share decreased by $0.13 compared to the same quarter last year.
• Net interest income decreased both compared to the previous quarter and the same quarter last year.
• The tangible common equity (TCE) ratio decreased slightly from the prior quarter.
• Nonperforming assets increased to $738 million, or 0.60% of total loans and leases, OREO and other NPAs, compared to $578 million, or 0.48%, a year-ago.

Risks

• The company faces risks related to changes in economic, political, and industry conditions.
• Deterioration in business and economic conditions, including inflation, supply chain issues, and labor shortages, could negatively impact results.
• The impact of pandemics, including COVID-19, and related variants, could affect the global economy and financial markets.
• Recent bank failures and volatility could lead to increased regulatory requirements and costs.
• Unexpected outflows of uninsured deposits could require the company to sell investment securities at a loss.
• Rising interest rates could negatively impact the value of the investment portfolio.
• Cybersecurity risks and uncertainty in U.S. fiscal and monetary policy pose potential challenges.
• Competitive pressures on product pricing and services could affect profitability.

Future Outlook

The company expects to accelerate loan growth throughout the year and into 2025, supporting revenue and profitability. The company's outlook for the year remains unchanged as they look to accelerate organic growth.

Management Comments

• Our first quarter results were highlighted by sustained organic growth, with deposit and loan balances continuing to expand as we enter the new year, said Steve Steinour, chairman, president, and CEO.
• Our outlook for the year remains unchanged as we look to accelerate organic growth.
• We foresee accelerating loan growth over the course of the year as new teams and expanded markets continue to see substantive opportunities in addition to our existing markets.
• We expect this growth momentum will carry through the year and into 2025, further supporting our revenue and profitability outlook.

Industry Context

The results reflect a mixed performance in the banking sector, with some growth in deposits and loans but pressure on net interest income due to the current interest rate environment and increased deposit costs. The company is focused on expanding into new markets and specialty banking areas.

Comparison to Industry Standards

• Huntington's CET1 ratio of 10.2% is within the range of many regional banks, but some larger national banks may have higher ratios.
• The net charge-off rate of 0.30% is relatively low, indicating good credit quality compared to some peers with higher charge-off rates.
• The company's deposit growth of 3% year-over-year is in line with some regional banks, but some institutions may have experienced higher or lower growth depending on their market focus and deposit strategies.
• The decrease in net interest margin to 3.01% reflects the broader industry trend of margin compression due to higher funding costs, which is impacting many banks including peers such as KeyCorp and Fifth Third Bancorp.
• The increase in noninterest income by 15% quarter-over-quarter is a positive sign, but the decrease of 9% year-over-year highlights the volatility in this area, which is common across the industry.

Stakeholder Impact

• Shareholders may be concerned about the year-over-year decrease in earnings per share but encouraged by the growth in deposits and loans.
• Employees may see opportunities for growth as the company expands into new markets.
• Customers may benefit from the company's focus on new products and services.
• Creditors may view the company's strong liquidity and capital position favorably.

Next Steps

• Huntington will continue to focus on executing key growth initiatives.
• The company plans to invest in new revenue-producing opportunities.
• They will continue to add talented bankers across their footprint.
• They will bolster capabilities in the commercial and regional bank.
• The company expects to see accelerating loan growth throughout the year and into 2025.

Key Dates

Keywords

earnings, deposits, loans, net interest income, noninterest income, credit quality, capital, FDIC, banking, financial results