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Huntington (HBAN) Q2 Earnings Top Estimates, Revenues Miss

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Huntington Bancshares Incorporated (HBAN - Free Report) has reported second-quarter 2021 adjusted earnings per share of 35 cents, outpacing the Zacks Consensus Estimate of 32 cents.

An increase in revenues, aided by high net interest and non-interest income, supported the results. A rise in leasing revenues and an increase in average earnings assets acted as driving factors. Improvement in deposits and a decrease in credit provisions were other positives. However, results were adversely impacted by elevated expenses and the TCF Financial Corporation acquisition-related expenses.

The company reported a net loss of $15 million in the quarter against a net income of $150 million in the year-ago quarter.

Revenues Rise, Expenses Escalate

Total revenues (FTE) climbed 8% year over year to $1.29 billion in the second quarter. However, the top line lagged the consensus estimate of $1.32 billion.

Net interest income (FTE basis) was $844 million, up 6% from the prior-year quarter. The upside resulted from an increase in average earning assets (17%), partly offset by a lower net interest margin (NIM), which contracted 28 basis points (bps) to 2.66%.

Non-interest income climbed 14% year over year to $444 million. The upside mainly stemmed from an increase in service charges on deposit accounts, card and payment processing, leasing revenues, and capital market fees.

Non-interest expenses flared up 59% on a year-over-year basis to $1.07 billion. This was chiefly due to higher professional services costs, outside data processing and other service costs, and marketing expenses. On an adjusted basis, costs increased 19%.

Efficiency ratio was 83.1%, up from the prior-year quarter’s 55.9%. A rise in ratio indicates a fall in profitability.

As of Jun 30, 2021, average loans and leases at Huntington increased 8.9% on a sequential basis to $87.4 billion. Average total deposits increased 13% from the prior quarter to $112.7 billion.

Credit Quality: A Mixed Bag

Net charge-offs were $62 million or an annualized 0.28% of average total loans in the reported quarter, down from $107 million or an annualized 0.54% recorded in the prior year. In the second quarter, the company reported credit provisioning of $211 million compared with a provision of $327 million in the prior-year quarter.

The quarter-end allowance for credit losses rose 27.5% to $2.32 billion. In addition, total non-performing assets totaled $1.01 million as of Jun 30, 2021, up 42.2%.

Capital Ratios

Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.97% and 12.24%, respectively, compared with 9.84% and 11.79% reported in the year-ago quarter. Tangible common equity to tangible assets ratio was 7.16%, down from 7.28% as of Jun 30, 2020.

Our Viewpoint

Huntington put up a decent performance in the June-ended period. Though the company displayed continued efforts in increasing loan and deposit balances, margin pressure and elevated expenses remain concerning. However, improvement in credit metrics on lower provisions due to the recovering economy is a tailwind.

On Jun 9, Huntington closed the buyout of TCF Financial and remains on track with the integration process. The company has also announced an $800-million share-repurchase program for the next four quarters. This might boost investor confidence in the stock.

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

Zions Bancorporation’s (ZION - Free Report) second-quarter 2021 net earnings per share of $2.08 surpassed the Zacks Consensus Estimate of $1.25. The bottom line marks a significant improvement from 34 cents earned in the year-ago quarter.

Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2021 adjusted earnings per share of $1.37 surpassed the Zacks Consensus Estimate of $1.15. The bottom line improved significantly from the prior-year quarter loss of $1.36.

New York Community Bancorp, Inc.’s (NYCB - Free Report) adjusted earnings per share of 33 cents for second-quarter 2021 surpassed the Zacks Consensus Estimate of 30 cents. The bottom line rose 57% year over year.

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