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Huntington (HBAN) Q4 Earnings Beat Estimates on Revenue Growth

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Huntington Bancshares Incorporated (HBAN - Free Report) reported fourth-quarter 2022 adjusted earnings per share of 43 cents, surpassing the Zacks Consensus Estimate of 41 cents. The company reported 36 cents in the comparable period last year.

The results benefited from notable increases in net interest income (NII) and a decline in expenses. However, a fall in fee income and higher provision from credit losses were headwinds.

Management noted, “We are very pleased with our outstanding financial performance for the fourth quarter which included the fourth consecutive quarter of record PPNR. The year was marked by the successful execution of key strategic initiatives and acquisition synergies which further expanded our capabilities and supported the achievement of our medium-term financial targets.”

The company reported a net income applicable to common shares of $617 million in the quarter, up 63.7% year over year.

In 2022, earnings per share of $1.45 increased a whopping 61.1% year over year but lagged the consensus estimate of $1.47.  The net income available to common shareholders was $2.12 billion, up from $1.15 billion in 2021.

Revenues Rise, Expenses Fall

Total revenues (on a fully-taxable equivalent or FTE basis) climbed 19.2% year over year to $1.97 billion in the fourth quarter. Also, the top line surpassed the consensus estimate of $1.95 billion.

In 2022, total revenues were up 21.1% from the prior-year level to $7.28 billion. Moreover, the reported figure surpassed the consensus mark of $7.26 billion.
NII (FTE basis) was $1.47 billion, up 29.3% from the prior-year quarter. The upside resulted from an increase in the net interest margin (NIM), which rose to 3.52% from 2.85%, and higher average total loans and leases.

Non-interest income moved down 3.1% to $499 million. The decline mainly stemmed from lower service charges on deposit accounts, mortgage banking and leasing revenues, partially offset by higher card and payment processing income, and capital market fees.

Non-interest expenses were down 11.8% to $1.08 billion. This was due to a fall in primarily almost all components like outside data processing and other service costs, marketing costs, lease financing equipment depreciation and deposit and other insurance expense.

The efficiency ratio was 54%, down from the prior-year quarter’s 73%. A decline in the ratio indicates a rise in profitability.

As of Dec 31, 2022, average loans and leases at Huntington improved 1.7% on a sequential basis to $118.9 billion. Average total deposits fell marginally to $145.7 billion.

Credit Quality Deteriorates

Net charge-offs were $50 million or an annualized 0.17% of average total loans in the reported quarter, up from $34 million or 0.12% recorded in the prior year. The quarter-end allowance for credit losses increased 7.8% to $2.27 billion. In the fourth quarter, the company recorded a provision from credit losses of $91 million against $64 million of reversal in the prior-year quarter.

Nonetheless, total non-performing assets were $594 million as of Dec 31, 2022, down from $750 million in the prior-year quarter.

Capital Ratios Solid

Common equity tier 1 risk-based capital ratio was 9.44% in the quarter compared with 9.33% in the year-ago period. Regulatory Tier 1 risk-based capital ratio was 10.99%, unchanged from the comparable period in 2021. The tangible common equity to tangible assets ratio in the fourth quarter was 5.55%, down from 6.88% as of Dec 31, 2021.

Our Viewpoint

Huntington put up a decent performance in the fourth quarter. The momentum in average earning asset growth and higher rates will drive NII in the upcoming quarters.  However, elevated non-interest expenses are likely to keep the bottom line under pressure. Also, declining mortgage banking income is a woe.

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

Citizens Financial Group (CFG - Free Report) reported fourth-quarter 2022 underlying earnings per share of $1.32, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose from $1.26 in the year-ago quarter.

CFG’s results reflect NII growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported fourth-quarter 2022 adjusted earnings per share $1.04, beating the Zacks Consensus Estimate of $1.00. In the prior-year quarter, the company reported EPS of 90 cents.

A significant fall in the fee income limited revenue growth, while higher provisions for credit losses and lower deposits were undermining factors. Nonetheless, higher NII and improved average loans and lease balances were positives for FITB.

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