Huntington Bancshares (HBAN) Tops Q2 EPS by 9c

Huntington Bancshares (NASDAQ: HBAN) reported Q2 EPS of $0.13, $0.09 better than the analyst estimate of $0.04.

2020 Second Quarter Highlights compared with 2019 Second Quarter:

• Fully-taxable equivalent total revenue decreased $5 million, or less than 1%.
• Fully-taxable equivalent net interest income decreased $22 million, or 3%.
• Net interest margin decreased 37 basis points to 2.94%.
• Noninterest income increased $17 million, or 5%, driven by a $62 million, or 182%, increase in mortgage banking income.
• Noninterest expense decreased $25 million, or 4%.
• Efficiency ratio of 55.9%, down from 57.6%.
• Average loans and leases increased $5.3 billion, or 7%, including a $4.8 billion, or 13%, increase in average commercial loans, $4.1 billion of which represented PPP loans, and a $0.4 billion, or 1%, increase in average consumer loans.
• Average core deposits increased $10.2 billion, or 13%, including a $10.1 billion, or 26%, increase in average demand deposits.
• Net charge-offs equated to 0.54% of average loans and leases, up from 0.25%.
• Nonperforming asset ratio of 0.89%, up from 0.61%.
• Provision for credit losses increased $268 million year-over-year to $327 million.
• Allowance for loan and lease losses (ALLL) increased $928 million to $1.7 billion, or 2.12% of total loans and leases; allowance for credit losses (ACL) increased to $1.8 billion, or 2.27% of total loans and leases.
• Common Equity Tier 1 (CET1) risk-based capital ratio of 9.84%, down from 9.88% and consistent with our 9% to 10% operating guideline.
• Tangible common equity (TCE) ratio of 7.28%, down from 7.80%.
• Tangible book value per common share increased $0.35, or 4%, to $8.32.

CEO Commentary:

"Our second quarter results reflect strong execution across the bank in a very challenging operating environment, including our extraordinary efforts to help our customers through the economic challenges associated with the pandemic," said Steve Steinour, chairman, president, and CEO. "To aid small- and medium-sized businesses across our footprint, we funded more than 37,000 loans with a total volume of more than $6 billion through the SBA's Paycheck Protection Program (PPP), and we continue to originate more PPP loans. Many of our customers benefited from a variety of actions we instituted, including fee waivers and payment relief programs. These actions are consistent with our Purpose of looking out for people. Huntington is well-positioned to support our customers through these current challenges and to help the economic recovery in the communities we serve."

"I am pleased we maintained total revenues essentially level with the year-ago quarter. Total noninterest income increased 5% as a result of record mortgage banking activity, though waivers to assist our customers pressured certain of our noninterest income lines. We continue to balance investments in technology and strategic business initiatives with prudent expense management given the headwinds posed by the interest rate environment and the effects of the pandemic on credit costs. We are taking action to manage expenses this year and position ourselves to make further investments in technology and other strategic initiatives, which will drive future performance."

"We saw strong balance sheet growth in the second quarter," said Steinour. "Average loan growth of 7% was driven by the PPP loans. The funds provided from these loans and inflows from government stimulus programs were key drivers of average core deposit growth of 13%. While line utilization has largely returned to pre-pandemic levels at this point, the related core deposits have largely remained with the bank, resulting in an elevated amount of deposits at quarter-end. Recently, as the economic outlook stabilized, our loan pipelines also experienced a modest upturn, providing reason for optimism regarding loan growth late this year and next."

"In June we received the results of the Federal Reserve's Comprehensive Capital Assessment and Review, and once again Huntington's credit results were among the best of the regional banks. Our projected cumulative loan losses in the Fed's independently-modeled, severely adverse scenario were tied for lowest in the peer group, and our projected capital ratios remained well in excess of regulatory requirements. Our consistently strong performance demonstrates our disciplined enterprise risk management and solid core earnings power."

"Yesterday, the Board declared the third quarter cash dividend of $0.15 per common share, unchanged from the prior quarter. Based on what we know today, management expects to maintain the current quarterly dividend rate in the fourth quarter, subject to the Board's normal quarterly approval process."

For earnings history and earnings-related data on Huntington Bancshares (HBAN) click here.

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