Baird removes Fresh Pick on Huntington and comments on banks

Baird removes Fresh Pick on Huntington

Investing.com -- Baird has removed its Fresh Pick designation on Huntington Bancshares (NASDAQ: HBAN) while maintaining an Outperform rating, as the firm views bank stocks as trading at or slightly above fair value.

The firm lowered its 2027 earnings per share estimate for Huntington to $1.80, below management's guidance of $1.90. Baird said it will be difficult for the bank to reach those targets without an extremely low provision and sustained strength in fees.

Baird expects the company may lower its guidance during the September conference season due to Cadence's lower net interest income contribution and loan-deposit mix affecting margin.

The firm noted that Huntington trades at around 12.7% capital to assets, with an implied return on assets of approximately 1.11%, which sits about 12% below the 2027 consensus ROA of 1.26%.

For the broader banking sector, Baird said the fundamental setup remains good, but tailwinds around net interest income inflection, benign credit conditions, and heavy capital return are already reflected in stock prices. The firm believes the industry is likely approaching a peak in return on equity.

The median market cap to assets ratio for Baird's coverage list stood at around 14% as of Friday's close, with an implied ROA of approximately 1.25% for the bank group.

Baird stated it prefers to add positions on weakness for the broader group, with Capital One Financial (NYSE: COF) and Pinnacle Financial Partners (NASDAQ: PNFP) as its favorites.

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