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Huntington (HBAN) Q1 Earnings Beat on Revenue Growth, Loans Up

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Huntington Bancshares Incorporated (HBAN - Free Report) has reported first-quarter 2022 adjusted earnings per share of 32 cents, surpassing the Zacks Consensus Estimate of 31 cents. This excluded certain after-tax notable items.

The first-quarter 2022 results benefited from the TCF acquisition, which contributed to average earning assets and fee income. Strength in capital market fees and net interest income (NII) drove the top line. However, declining capital ratios and credit quality were dampeners.

The company reported net income applicable to common shares of $432 million in the quarter, down 14% from the year-ago quarter.

Revenues Rise, Expenses Escalate

Total revenues (on a fully-taxable equivalent or FTE basis) climbed 20% year over year to $1.65 billion in the first quarter. Also, the top line surpassed the consensus estimate of $1.62 billion.

NII (FTE basis) was $1.15 million, up 18% from the prior-year quarter. The upside resulted from an increase in average earning assets, partly offset by a lower FTE net interest margin (NIM), which contracted 60 basis points (bps) to 2.88%.

Non-interest income climbed 26% year over year to $499 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 33% on a year-over-year basis to $1.05 billion. This was chiefly due to higher professional services costs, outside data processing and other service costs, and marketing expenses.

The efficiency ratio was 62.9%, up from the prior-year quarter’s 57%. A rise in the ratio indicates a fall in profitability.

As of Mar 31, 2022, average loans and leases at Huntington improved 1.5% on a sequential basis to $111.14 billion. Average total deposits rose marginally from the prior quarter to $142.9 billion.

Credit Quality Deteriorates

Net charge-offs were $19 million or an annualized 0.07% of average total loans in the reported quarter, down from $64 million or 0.32% recorded in the prior year.

However, the quarter-end allowance for credit losses rose 21.1% to $2.11 billion. In the first quarter, the company reported a provision from credit losses of $25 million against a benefit of $60 million in the prior-year quarter. In addition, total non-performing assets were $708 million as of Mar 31, 2022, up from $544 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 9.22% and 10.84%, respectively, compared with 10.32% and 13.32% reported in the year-ago quarter. The tangible common equity to tangible assets ratio was 6.28%, down from 7.11% as of Mar 31, 2021.

Our Viewpoint

Huntington put up a decent performance in the March-end quarter. The momentum in average earning asset growth will drive NII in the upcoming quarters. Huntington’s agreement to acquire Capstone Partners, an investment banking firm, will expand its capital market business. 

However, deterioration in credit metrics on provisions and elevated expenses are headwinds.

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

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’sresults reflect higher loan balance, provision benefits and declining expenses. However, declines in NII and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with the $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII, net interest margin, and a rise in expenses were the key undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.