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Huntington (HBAN) Q4 Earnings in Line, Tax Benefit Recorded
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Huntington Bancshares Incorporated (HBAN - Free Report) reported fourth-quarter 2017 adjusted earnings per share of 26 cents, in line with the Zacks Consensus Estimate. However, the figure came in higher than the prior-year quarter adjusted earnings of 24 cents. The reported earnings figure excludes Federal tax reform-related estimated tax benefit of 11 cents per share.
Results were driven by higher revenues and lower provisions. Continued growth in both loan and deposit balances was also recorded. However, elevated expenses were the primary headwinds.
Including one-time adjustments, net income surged nearly 80.8% year over year to $432 million during the quarter.
For full-year 2017, net income was $1.19 billion or $1.00 per share compared with $712 million or 70 cents per share in the prior year. Excluding non-recurring items, earnings came in at 98 cents per share, surpassing the Zacks Consensus Estimate of 89 cents.
Revenues, Loans & Deposits Escalate, Expenses Flare Up
For full-year 2017, Huntington Bancshares reported revenues of $4.4 billion on a fully taxable-equivalent (FTE) basis, up 22% year over year. Moreover, the figure outpaced the Zacks Consensus Estimate of $4.3 billion.
The company’s total revenues on a fully taxable-equivalent (FTE) basis came in at $1.12 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.10 billion. Moreover, total revenues were up 4% year over year.
Net interest income (NII) came in at $771 million on a FTE basis, up 5% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 5 basis points (bps) in net interest margin (NIM), to 3.30%.
Non-interest income climbed 2% year over year to $340 million. The upsurge was mainly due to growth in capital markets fees and other income.
Adjusted non-interest expense inched up 1% year over year to $633 million. The increase stemmed from rise in personnel costs, deposit and other insurance expense, professional services costs and other expenses. Including the impact of certain non-recurring items, non-interest expense dropped 7% year over year.
As of Dec 31, 2017, average loans and leases at Huntington jumped nearly 4% year over year to $68.9 billion. Also, average total deposits ascended 1% year over year to $77.7 billion.
Credit Quality: A Mixed Bag
Net charge-offs were $41 million or an annualized 0.24% of average total loans in the reported quarter, down from $44 million or an annualized 0.26% recorded in the year-ago quarter.
Provision for credit losses was down 13.3% on a year-over year basis to $65 million. In addition, total non-performing assets totaled $389 million as of Dec 31, 2017, down from $481 million as of Dec 31, 2016.
However, the quarter-end allowance for credit losses, as a percentage of total loans and leases, increased to 1.11% from 1.10% in the year-earlier quarter.
Strong Capital Ratios
Huntington Bancshares capital ratios remained strong.
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.89% and 11.22%, respectively, as compared with 9.56% and 10.92% in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.34%, down from 7.16% as of Dec 31, 2016.
Outlook for 2018
With improving macroeconomic environment and the company’s accomplishment of its core strategies, total revenues for full-year 2018 are projected to be up in the range of 4-6%. Non-interest expense is anticipated to decrease in the range of 2-4%.
NIM for 2018 is estimated to remain flat as compared with the prior year on a GAAP basis as expansion in NIM is anticipated to offset the reduced benefit of purchase accounting. Further, efficiency ratio is projected at 55-57%.
Management predicts average loans and leases to increase in the range of 4-6% on an annual basis, while average deposits are expected to increase around 3-5%.
Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current low level of problem assets and credit costs.
Management anticipates NCOs to remain below the long-term normalized range of 35-55 basis points.
The effective tax rate for 2018 is estimated in the range of 16-17%.
Our Viewpoint
Huntington reported an encouraging quarter. The company has a solid franchise in the Midwest and is focused on capitalizing on its growth opportunities. Further, it exhibits consistent efforts in increasing loan and deposit balances, aiding revenue growth. Additionally, we remain optimistic about the company’s several strategic actions, including acquisitions and consolidation of branches.
However, escalating costs and unstable credit metrics pose challenges to the company’s financials.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Driven by top-line strength, Regions Financial Corporation (RF - Free Report) recorded an impressive earnings surprise of 3.8% in fourth-quarter 2017. Reported earnings of 27 cents per share outpaced the Zacks Consensus Estimate of 26 cents. Moreover, results compared favorably with the prior-year quarter’s earnings of 23 cents. Results included certain one-time items of 7 cents per share.
Comerica Inc. (CMA - Free Report) pulled off a positive earnings surprise of 5.8% in the fourth quarter. Adjusted earnings per share of $1.28 surpassed the Zacks Consensus Estimate of $1.21. Also, the bottom line compares favorably with the prior-year quarter figure of 99 cents.
Riding on higher revenues, PNC Financial (PNC - Free Report) reported a positive earnings surprise of 4.1% in fourth-quarter 2017. Adjusted earnings per share of $2.29 beat the Zacks Consensus Estimate of $2.20. Moreover, the bottom line reflected a 16.2% increase from the prior-year quarter.
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Huntington (HBAN) Q4 Earnings in Line, Tax Benefit Recorded
Huntington Bancshares Incorporated (HBAN - Free Report) reported fourth-quarter 2017 adjusted earnings per share of 26 cents, in line with the Zacks Consensus Estimate. However, the figure came in higher than the prior-year quarter adjusted earnings of 24 cents. The reported earnings figure excludes Federal tax reform-related estimated tax benefit of 11 cents per share.
Results were driven by higher revenues and lower provisions. Continued growth in both loan and deposit balances was also recorded. However, elevated expenses were the primary headwinds.
Including one-time adjustments, net income surged nearly 80.8% year over year to $432 million during the quarter.
For full-year 2017, net income was $1.19 billion or $1.00 per share compared with $712 million or 70 cents per share in the prior year. Excluding non-recurring items, earnings came in at 98 cents per share, surpassing the Zacks Consensus Estimate of 89 cents.
Revenues, Loans & Deposits Escalate, Expenses Flare Up
For full-year 2017, Huntington Bancshares reported revenues of $4.4 billion on a fully taxable-equivalent (FTE) basis, up 22% year over year. Moreover, the figure outpaced the Zacks Consensus Estimate of $4.3 billion.
The company’s total revenues on a fully taxable-equivalent (FTE) basis came in at $1.12 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.10 billion. Moreover, total revenues were up 4% year over year.
Net interest income (NII) came in at $771 million on a FTE basis, up 5% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 5 basis points (bps) in net interest margin (NIM), to 3.30%.
Non-interest income climbed 2% year over year to $340 million. The upsurge was mainly due to growth in capital markets fees and other income.
Adjusted non-interest expense inched up 1% year over year to $633 million. The increase stemmed from rise in personnel costs, deposit and other insurance expense, professional services costs and other expenses. Including the impact of certain non-recurring items, non-interest expense dropped 7% year over year.
As of Dec 31, 2017, average loans and leases at Huntington jumped nearly 4% year over year to $68.9 billion. Also, average total deposits ascended 1% year over year to $77.7 billion.
Credit Quality: A Mixed Bag
Net charge-offs were $41 million or an annualized 0.24% of average total loans in the reported quarter, down from $44 million or an annualized 0.26% recorded in the year-ago quarter.
Provision for credit losses was down 13.3% on a year-over year basis to $65 million. In addition, total non-performing assets totaled $389 million as of Dec 31, 2017, down from $481 million as of Dec 31, 2016.
However, the quarter-end allowance for credit losses, as a percentage of total loans and leases, increased to 1.11% from 1.10% in the year-earlier quarter.
Strong Capital Ratios
Huntington Bancshares capital ratios remained strong.
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.89% and 11.22%, respectively, as compared with 9.56% and 10.92% in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.34%, down from 7.16% as of Dec 31, 2016.
Outlook for 2018
With improving macroeconomic environment and the company’s accomplishment of its core strategies, total revenues for full-year 2018 are projected to be up in the range of 4-6%. Non-interest expense is anticipated to decrease in the range of 2-4%.
NIM for 2018 is estimated to remain flat as compared with the prior year on a GAAP basis as expansion in NIM is anticipated to offset the reduced benefit of purchase accounting. Further, efficiency ratio is projected at 55-57%.
Management predicts average loans and leases to increase in the range of 4-6% on an annual basis, while average deposits are expected to increase around 3-5%.
Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current low level of problem assets and credit costs.
Management anticipates NCOs to remain below the long-term normalized range of 35-55 basis points.
The effective tax rate for 2018 is estimated in the range of 16-17%.
Our Viewpoint
Huntington reported an encouraging quarter. The company has a solid franchise in the Midwest and is focused on capitalizing on its growth opportunities. Further, it exhibits consistent efforts in increasing loan and deposit balances, aiding revenue growth. Additionally, we remain optimistic about the company’s several strategic actions, including acquisitions and consolidation of branches.
However, escalating costs and unstable credit metrics pose challenges to the company’s financials.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise | Huntington Bancshares Incorporated Quote
Currently, Huntington carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Driven by top-line strength, Regions Financial Corporation (RF - Free Report) recorded an impressive earnings surprise of 3.8% in fourth-quarter 2017. Reported earnings of 27 cents per share outpaced the Zacks Consensus Estimate of 26 cents. Moreover, results compared favorably with the prior-year quarter’s earnings of 23 cents. Results included certain one-time items of 7 cents per share.
Comerica Inc. (CMA - Free Report) pulled off a positive earnings surprise of 5.8% in the fourth quarter. Adjusted earnings per share of $1.28 surpassed the Zacks Consensus Estimate of $1.21. Also, the bottom line compares favorably with the prior-year quarter figure of 99 cents.
Riding on higher revenues, PNC Financial (PNC - Free Report) reported a positive earnings surprise of 4.1% in fourth-quarter 2017. Adjusted earnings per share of $2.29 beat the Zacks Consensus Estimate of $2.20. Moreover, the bottom line reflected a 16.2% increase from the prior-year quarter.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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