Huntington to Acquire CRBC?

Michigan-based Citizens Republic Bancorp Inc. ( ) is considering a takeover of itself and Huntington Bancshares Inc. ( HBAN - Analyst Report ) , might be interested in acquiring it, according to a Bloomberg report.

According to the report, Citizens Republic is looking for bids from potential buyers, retained JPMorgan Chase & Co. ( JPM - Analyst Report ) for this purpose and is said to have gotten in touch with potential buyers. Notably, the company which suffered substantial losses since the financial crisis has yet to repay its bailout money. Also, it has looked for various ways, including equity issuance, to gather money and payback its dues.

As a matter of fact, according to its recent conference call, Huntington intends to invest in Michigan and enhance its business throughout the region. Markets in Lansing and Ann Arbor look appealing and the company wants to expand its business there.

Recent Huntington Deals in Michigan

Earlier in the year, in an effort to expand its footprint in Southeast Michigan, Huntington acquired Fidelity Bank in a Federal Deposit Insurance Corporation (FDIC) assisted deal. The deal added 15 branches to Huntington’s network. For Huntington, the deal was a continuation of its commitment to the Michigan region besides adding to its competitive edge.

Moreover, in May, Huntington partnered with Meijer to offer branch offices in several Meijer stores as part of its effort to increase its presence in Michigan. A 10-year in-store banking agreement was signed between Huntington and Meijer that would provide Huntington over 200 branches in Michigan.

This reflects an increase of over 65% in branch offices and more than 500 job additions in the state. Such deals are a strategic fit for Huntington, given its intent to deepen its presence in the Michigan market.

Our Viewpoint

We believe that opportunistic acquisitions will help Huntington gain market share in Michigan and thereby enhance its profitability in the long run. For Citizens, bids can be expected from a number of peers of Huntington as well. Besides Huntington, Fifth Third Bancorp ( FITB - Analyst Report ) also has a solid deposit base in the region.

Notably, following a turnaround phase after the break out of the financial crisis, Huntington is now focused on capitalizing on growth opportunities. Strategic initiatives are right on track.

Yet, a sluggish economic recovery and low interest rate environment coupled with regulatory issues will likely restrict robust earnings improvement in the upcoming quarters.

Huntington Bancshares shares maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation.