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Huntington (HBAN) Q2 Earnings Top Estimates, Provisions Up
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Huntington Bancshares’ (HBAN - Free Report) second-quarter 2020 earnings per share of 13 cents outpaced the Zacks Consensus Estimate of 6 cents. The bottom-line figure, however, comes in 61% lower than the prior-year quarter reported tally.
Decline in operating expenses and a higher fee income were tailwinds. Notably, a rise in mortgage banking revenues acted as a driving factor. Further, improvement in loans and deposits was another positive.
However, results were adversely impacted by higher credit provisioning due to the bleak economic conditions. Also, a lower net interest income, along with pressure on margin, due to low rates, was a major drag.
The company reported net income of $150 million for the quarter, which slumped 59% year over year.
Total revenues edged down nearly 1% year over year to $1.19 billion in the second quarter. Yet, the top-line figure surpassed the Zacks Consensus Estimate of $1.15 billion.
Net interest income (FTE basis) was $797 million, down 3% from the prior-year quarter. This downside resulted from a lower net interest margin (NIM), partly offset by an increase in average earnings assets. Also, net interest margin (NIM) contracted 37 basis points to 2.94%.
Non-interest income climbed 5% year over year to $391 million. This upswing mainly stemmed from an increase in almost all components of income, partly muted by lower gain on sale of loans and leases, capital market fees, service charges on deposit account and other non-interest income. Notably, mortgage banking income more than doubled.
Non-interest expenses slid 4% on a year-over-year basis to $675 million. This was chiefly due to lower personnel costs, professional services, amortization of intangibles, marketing, and other costs, partly negated by elevated outside data processing and other service costs, net occupancy and equipment expenses.
Efficiency ratio was 55.9%, down from the prior-year quarter’s 57.6%. A decline in ratio indicates a rise in profitability.
As of Jun 30, 2020, average loans and leases at Huntington increased 5.9% on a sequential basis to $80.2 billion. Moreover, average total deposits increased 13% from the prior quarter to $93.2 billion.
Credit Quality Disappoints
Net charge-offs were $107 million or an annualized 0.54% of average total loans in the reported quarter, up from the $48 million or an annualized 0.25% recorded in the prior year. Furthermore, the quarter-end allowance for credit losses more than doubled to $1.82 billion.
Provision for credit losses went up significantly on a year-over year basis to $327 million on the coronavirus crisis. In addition, total non-performing assets totaled $713 million as of Jun 30, 2020, up 55%.
Capital Ratios
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.84% and 11.79%, respectively, compared with the 9.88% and 11.28% reported in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.28%, down from 7.80% as of Jun 30, 2019. Return on average assets and average common equity was 0.51% and 5%, respectively, compared with the 1.36% and 13.5% recorded in the prior-year quarter.
Outlook for Q3
Revenues are expected to increase about 2% sequentially, while NIM is likely to expand around 7-10 basis points (bps). Non-interest expenses are anticipated to increase about 5% sequentially.
Management expects average loans and leases to remain relatively stable sequentially. Average total deposits are expected to decline around 1%.
A challenging economic environment is likely to unfavorably impact asset quality. Net charge???offs are expected to be near 65 bps, impacted by the oil & gas portfolio.
Our Viewpoint
Huntington put up a decent performance during the April-June period. Though the company displayed continued efforts in increasing loan and deposit balances, declining interest income and margin pressure are concerns. Further, deteriorating credit metrics on higher provisions due to the coronavirus crisis is another headwind.
Nevertheless, the company, which has a solid franchise in the Midwest, is focused on capitalizing on its growth opportunities. Additionally, lower expenses and higher mortgage banking income will likely continue being driving factors.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Comerica (CMA - Free Report) came up with second-quarter 2020 earnings per share of 80 cents, significantly surpassing the Zacks Consensus Estimate of 21 cents. Earnings, however, came in lower than the prior-year quarter figure of $1.94. Lower revenues, aided by reduction in net interest as well as non-interest income, were recorded. Moreover, rise in expenses and provisions were major drags. Nevertheless, rise in loans and deposits acted as tailwinds.
Regions Financial (RF - Free Report) reported second-quarter adjusted loss of 23 cents per share, as against the earnings of 39 cents per share recorded in the prior-year period. The Zacks Consensus Estimate was pegged at 7 cents. Results were negatively impacted by higher provisions for credit losses on increasing economic uncertainty due to coronavirus woes. Moreover, rise in expenses is a major drag. Nevertheless, higher revenues aided by rising loans and deposit balances provided some respite.
First Horizon National Corporation (FHN - Free Report) delivered second-quarter 2020 adjusted earnings per share of 20 cents, missing the Zacks Consensus Estimate of 21 cents. Further, the bottom line comes in 52.4% lower than the year-ago figure. Results notably reflect First Horizon’s improved deposit balance and higher revenues. In addition, efficiency ratio contracted during the quarter, indicating increased profitability. Yet, rising expenses and provisions were major drags.
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Huntington (HBAN) Q2 Earnings Top Estimates, Provisions Up
Huntington Bancshares’ (HBAN - Free Report) second-quarter 2020 earnings per share of 13 cents outpaced the Zacks Consensus Estimate of 6 cents. The bottom-line figure, however, comes in 61% lower than the prior-year quarter reported tally.
Decline in operating expenses and a higher fee income were tailwinds. Notably, a rise in mortgage banking revenues acted as a driving factor. Further, improvement in loans and deposits was another positive.
However, results were adversely impacted by higher credit provisioning due to the bleak economic conditions. Also, a lower net interest income, along with pressure on margin, due to low rates, was a major drag.
The company reported net income of $150 million for the quarter, which slumped 59% year over year.
Revenues Down, Expenses Fall, Loans & Deposits Escalate
Total revenues edged down nearly 1% year over year to $1.19 billion in the second quarter. Yet, the top-line figure surpassed the Zacks Consensus Estimate of $1.15 billion.
Net interest income (FTE basis) was $797 million, down 3% from the prior-year quarter. This downside resulted from a lower net interest margin (NIM), partly offset by an increase in average earnings assets. Also, net interest margin (NIM) contracted 37 basis points to 2.94%.
Non-interest income climbed 5% year over year to $391 million. This upswing mainly stemmed from an increase in almost all components of income, partly muted by lower gain on sale of loans and leases, capital market fees, service charges on deposit account and other non-interest income. Notably, mortgage banking income more than doubled.
Non-interest expenses slid 4% on a year-over-year basis to $675 million. This was chiefly due to lower personnel costs, professional services, amortization of intangibles, marketing, and other costs, partly negated by elevated outside data processing and other service costs, net occupancy and equipment expenses.
Efficiency ratio was 55.9%, down from the prior-year quarter’s 57.6%. A decline in ratio indicates a rise in profitability.
As of Jun 30, 2020, average loans and leases at Huntington increased 5.9% on a sequential basis to $80.2 billion. Moreover, average total deposits increased 13% from the prior quarter to $93.2 billion.
Credit Quality Disappoints
Net charge-offs were $107 million or an annualized 0.54% of average total loans in the reported quarter, up from the $48 million or an annualized 0.25% recorded in the prior year. Furthermore, the quarter-end allowance for credit losses more than doubled to $1.82 billion.
Provision for credit losses went up significantly on a year-over year basis to $327 million on the coronavirus crisis. In addition, total non-performing assets totaled $713 million as of Jun 30, 2020, up 55%.
Capital Ratios
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.84% and 11.79%, respectively, compared with the 9.88% and 11.28% reported in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.28%, down from 7.80% as of Jun 30, 2019. Return on average assets and average common equity was 0.51% and 5%, respectively, compared with the 1.36% and 13.5% recorded in the prior-year quarter.
Outlook for Q3
Revenues are expected to increase about 2% sequentially, while NIM is likely to expand around 7-10 basis points (bps). Non-interest expenses are anticipated to increase about 5% sequentially.
Management expects average loans and leases to remain relatively stable sequentially. Average total deposits are expected to decline around 1%.
A challenging economic environment is likely to unfavorably impact asset quality. Net charge???offs are expected to be near 65 bps, impacted by the oil & gas portfolio.
Our Viewpoint
Huntington put up a decent performance during the April-June period. Though the company displayed continued efforts in increasing loan and deposit balances, declining interest income and margin pressure are concerns. Further, deteriorating credit metrics on higher provisions due to the coronavirus crisis is another headwind.
Nevertheless, the company, which has a solid franchise in the Midwest, is focused on capitalizing on its growth opportunities. Additionally, lower expenses and higher mortgage banking income will likely continue being driving factors.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Huntington Bancshares Incorporated price-consensus-eps-surprise-chart | Huntington Bancshares Incorporated Quote
Currently, Huntington carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Comerica (CMA - Free Report) came up with second-quarter 2020 earnings per share of 80 cents, significantly surpassing the Zacks Consensus Estimate of 21 cents. Earnings, however, came in lower than the prior-year quarter figure of $1.94. Lower revenues, aided by reduction in net interest as well as non-interest income, were recorded. Moreover, rise in expenses and provisions were major drags. Nevertheless, rise in loans and deposits acted as tailwinds.
Regions Financial (RF - Free Report) reported second-quarter adjusted loss of 23 cents per share, as against the earnings of 39 cents per share recorded in the prior-year period. The Zacks Consensus Estimate was pegged at 7 cents. Results were negatively impacted by higher provisions for credit losses on increasing economic uncertainty due to coronavirus woes. Moreover, rise in expenses is a major drag. Nevertheless, higher revenues aided by rising loans and deposit balances provided some respite.
First Horizon National Corporation (FHN - Free Report) delivered second-quarter 2020 adjusted earnings per share of 20 cents, missing the Zacks Consensus Estimate of 21 cents. Further, the bottom line comes in 52.4% lower than the year-ago figure. Results notably reflect First Horizon’s improved deposit balance and higher revenues. In addition, efficiency ratio contracted during the quarter, indicating increased profitability. Yet, rising expenses and provisions were major drags.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>