Huntington’s (HBAN) Q2 earnings outpace revenue growth, loans up – July 21, 2022

Huntington Bancactions incorporated (HBAN) reported adjusted earnings per share of 36 cents per share for the second quarter of 2022. This excludes one cent per share of after-tax acquisition-related expenses. The reported figure exceeded Zacks’ consensus estimate by 34 cents. The company said 35 cents from the same time last year.

The second quarter 2022 results reflect the full quarter benefits of the TCF acquisition finalized in June 2021. Strong commission income and net interest income (NII) boosted revenue.

Management noted, “The second quarter was marked by robust loan growth, higher average deposit balances and sequential revenue growth of 6%, benefiting from higher interest rates. We achieved our targeted spend level by complementing TCF cost synergies and delivering sustainable positive operating leverage.

The company reported net income applicable to common shares of $511 million in the quarter compared to a net loss of $58 million in the prior year quarter.

Income rises, expenses fall

Total revenue (on a fully taxable equivalent, or FTE, basis) increased 36% year-over-year to $1.75 billion in the second quarter. Additionally, revenue exceeded the consensus estimate of $1.70 billion.

NII (FTE basis) was $1.26 million, up 50% from the prior year quarter. The rise was driven by an increase in net interest margin (NIM) from 2.66% to 3.15% and an increase in average earning assets.

Non-interest revenue climbed 9% year over year to $485 million. The increase was primarily driven by higher service fees on deposit accounts, card and payment processing, rental income and capital market fees.

Non-interest expense decreased 5% year over year to $1.01 billion. This was primarily due to lower costs for professional services, external data processing and other service costs, as well as net occupancy costs.

The efficiency ratio was 57.3%, down from 83.1% in the prior year quarter. A decrease in the ratio indicates an increase in profitability.

As of June 30, 2022, average loans and leases at Huntington improved 3% on a sequential basis to $113.9 billion. Average total deposits increased 1% from the prior quarter to $145 billion.

Credit quality is strengthening

Net write-offs were $8 million or 0.03% annualized of average total loans in the current quarter, down from $62 million or 0.28% a year earlier.

Additionally, the quarter-end provision for credit losses decreased 6.6% to $2.16 billion. In the second quarter, the company recorded a provision for credit losses of $67 million, compared to $211 million in the year-ago quarter. Additionally, total non-performing assets were $682 million as of June 30, 2022, compared to $1.01 billion in the prior year quarter.

Lower capital ratios

The common equity Tier 1 risk-based capital ratio and Tier 1 regulatory risk-based capital ratio were 9.05% and 10.63%, respectively, compared to 9.98% and 12.25 % reported in the quarter of the previous year. The ratio of tangible common stock to tangible assets was 5.80%, compared to 7.15% as of June 30, 2021.

Our point of view

Huntington put in a decent performance in the second quarter. The growth momentum of middle-income assets will boost the NII in the coming quarters. Huntington’s acquisition of Capstone Partners and Torana will expand its fee income capabilities.

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

Performance of other banks

M&T Banking Corporation (MTB Free Report) reported net operating income per share of $3.10 for the second quarter of 2022, in line with Zacks’ consensus estimate. However, net income compares unfavorably to the $3.45 per share reported a year ago.

An increase in the NII on net interest margin expansion and balance sheet strength boosted MTB’s results. Yet increased spending has been a key undermining factor.

Financial truistit is (TFC Free Report) second-quarter 2022 adjusted earnings of $1.20 per share beat Zacks’ consensus estimate of $1.17. However, TFC’s net income was down 22.6% from the prior year quarter.

TFC’s results were helped by average loan growth and higher rates, which boosted the NII. However, lower non-interest income and higher provisions were the main headwinds.

Citizens Financial Group (CFG Free Report) reported underlying earnings per share of $1.14 in the second quarter of 2022, beating Zacks’ consensus estimate of $1.02. However, net income fell 22% from the prior year quarter.

CFG results reflect NII growth on rising loan balances. In addition, strong balance sheet growth, supported by an improving economy, was a tailwind. Citizens Financial closed the acquisition of Investors Bancorp on April 6, 2022. However, increased spending was a spoilsport.