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Huntington (HBAN) Q4 Earnings & Revenues Miss, Loans Decline

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Huntington Bancshares Incorporated (HBAN - Free Report) has reported fourth-quarter 2021 adjusted earnings per share of 36 cents, missing the Zacks Consensus Estimate of 37 cents. This excluded certain after-tax notable items.

Results were affected by $177 million of TCF acquisition-related pretax expenses and $10 million pretax of expenses related to the exit of a strategic distribution relationship. Also, declining capital ratios created a headwind. Nonetheless, provision benefits and net interest income growth were positives.

The company reported a net income of $401 million in the quarter compared with $316 million in the year-ago quarter.

For 2021, the net income available to common shareholders was $1.15 million compared with $717 million reported in 2020.

Revenues Rise, Expenses Escalate

Total revenues (FTE basis) climbed 33% year over year to $1.65 billion in the fourth quarter. However, the top line missed the consensus estimate of $1.69 billion.

In 2021, total revenues were up 24% from the prior-year level to around $6 billion. However, the reported figure missed the consensus mark of $6.07 billion.

Net interest income (FTE basis) was $1.14 million, up 37% from the prior-year quarter. The upside resulted from an increase in average earning assets, partly offset by a lower net interest margin (NIM), which contracted 10 basis points (bps) to 2.84%.

Non-interest income climbed 26% year over year to $515 million. The upside mainly stemmed from increased service charges on deposit accounts, card and payment processing, leasing revenues, and capital market fees.

Non-interest expenses flared up 62% on a year-over-year basis to $1.22 billion. This was chiefly due to higher professional services costs, outside data processing and other service costs, and marketing expenses.

The efficiency ratio was 73 %, up from the prior-year quarter’s 60.2%. A rise in the ratio indicates a fall in profitability.

As of Dec 31, 2021, average loans and leases at Huntington fell marginally on a sequential basis to $109.9 billion. Average total deposits remained flat from the prior quarter at $142.3 billion.

Credit Quality: A Mixed Bag

Net charge-offs were $34 million or an annualized 0.12% of average total loans in the reported quarter, down from $112 million or 0.55% recorded in the prior year. In the fourth quarter, the company reported a credit provision benefit of $64 million compared with a provision of $103 million in the prior-year quarter.

However, the quarter-end allowance for credit losses rose 12.9% to $2.11 billion. In addition, total non-performing assets were $750 million as of Dec 31, 2021, up from $563 million in the prior-year quarter.

Capital Ratios Decline

Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.33% and 10.99%, respectively, compared with 10% and 12.47% reported in the year-ago quarter. Tangible common equity to tangible assets ratio was 6.88%, down from 7.16% as of Dec 31, 2020.

Capital Deployment

The company has repurchased $150 million of common stock in the fourth quarter and has $150 million remaining under the current $800-million authorization.

Our Viewpoint

Huntington put up a decent performance in the December-end quarter. Improvement in credit metrics on lower provisions due to the recovering economy is a tailwind.

However, margin pressure and elevated expenses remain concerning.

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

State Street’s (STT - Free Report) fourth-quarter 2021 adjusted earnings of $2.00 per share outpaced the Zacks Consensus Estimate of $1.91. STT's bottom line was 18.3% higher than the prior-year level.

State Street’s results reflected investment servicing wins, provision benefits and improvement in fee income. However, a rise in expenses, a fall in net interest revenues and lower interest rates were the undermining factors.

BOK Financial’s (BOKF - Free Report) earnings per share of $1.71 missed the Zacks Consensus Estimate of $1.81. The bottom line decreased 22.6% from the prior-year quarter.

Results were undermined by lower fees and commissions, and a decline in the loan balance. Nonetheless, lower expenses, higher net interest revenues and provision benefits were tailwinds for BOKF.

F.N.B. Corporation’s (FNB - Free Report) fourth-quarter 2021 adjusted earnings per share of 30 cents met the Zacks Consensus Estimate. FNB's bottom line reflects a rise of 7.1% from the prior-year quarter.

F.N.B. Corporation’s results were primarily aided by a rise in fee income, lower expenses and provision benefits. However, a fall in NII was the undermining factor.