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Huntington (HBAN) Q3 Earnings & Revenues Beat, Costs Up

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Huntington Bancshares Incorporated (HBAN - Free Report) reported third-quarter 2023 earnings per share of 35 cents, surpassing the Zacks Consensus Estimate of 32 cents. However, the bottom line declined 10.3% from the prior-year figure.

Results benefited from an increase in non-interest income. It also reported lower provision for credit losses despite a challenging economic backdrop. However, a fall in net interest income (NII) and elevated expenses were headwinds.

The company reported a net income applicable to common shares of $510 million in the quarter, down 9.7% year over year.

Revenues Fall, Expenses Climb up

Total revenues (on a fully taxable equivalent or FTE basis) declined 1.2% year over year to $1.89 billion in the third quarter. However, the top line surpassed the consensus estimate of $1.82 billion.

NII (FTE basis) was $1.38 billion, down 2.3% from the prior-year quarter. The fall was due to a decline in net interest margin (NIM) and an increase in average interest-bearing liabilities, partially offset by an increase in average earning assets. NIM decreased 22 basis points to 3.20% in the reported quarter.

Non-interest income moved up 2.2% year over year to $509 million. The rise was largely due to an increase in almost all the components of non-interest income, except for a decrease in capital market fees and gain on the sale of loans.

Non-interest expenses were up 3.5% year over year to $1.09 billion. This was mainly due to a rise in almost all the components of non-interest expenses, except for a decrease in amortization of intangibles, lease financing equipment depreciation and other expenses.

The efficiency ratio was 57%, up from the year-ago quarter’s 54.4%. A rise in the efficiency ratio indicates a decrease in profitability.

As of Sep 30, 2023, average loans and leases at Huntington decreased marginally on a sequential basis to $120.78 billion. However, average total deposits increased 1.8% to $148.15 billion.

Credit Quality Deteriorates

Net charge-offs were $73 million or an annualized 0.24% of average total loans and leases in the reported quarter, up from 44 million or 0.15% recorded in the prior year. The quarter-end allowance for credit losses increased 6.2% to $2.37 billion. Further, total non-performing assets were $634 million as of Sep 30, 2023, up from $627 million in the prior-year quarter.

Nonetheless, in the third quarter, the company recorded a provision for credit losses of $99 million compared with $106 million in the year-ago quarter.

Capital Ratios Solid

The common equity tier 1 risk-based capital ratio was 10.10% in the quarter compared with 9.27% in the year-ago period. The regulatory Tier 1 risk-based capital ratio was 11.88%, up from 10.84% in the comparable period in 2022. The tangible common equity to tangible assets ratio in the third quarter was 5.70%, up from 5.32% in the year-ago quarter.

Our Viewpoint

Huntington’s inorganic expansion moves are likely to bolster its revenue growth in the near term. Its elevated non-interest expenses are likely to keep the bottom line under pressure in the upcoming period. Further, any deterioration in the balance sheet might affect its financials.

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

Bank OZK’s (OZK - Free Report) third-quarter 2023 earnings per share of $1.49 beat the Zacks Consensus Estimate of $1.44. The bottom line reflects a rise of 38% from the year-earlier quarter.

OZK’s results were positively impacted by an improvement in NII, driven by higher rates and robust loan and deposit balances. However, rising expenses, a decline in non-interest income and an increase in provision for credit losses were concerns.

Fifth Third Bancorp (FITB - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of 92 cents, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company reported an EPS of 93 cents.

Results were aided by a rise in non-interest income and deposit balance. However, a fall in NII limited its revenue growth. Higher expenses and a decline in average loan and lease balance were undermining factors for FITB.

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