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Huntington (HBAN) Q1 Earnings Miss Estimates, Provisions Up

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Huntington Bancshares’ (HBAN - Free Report) first-quarter 2020 earnings per share of 3 cents lagged the Zacks Consensus Estimate of 12 cents amid the coronavirus crisis. The bottom-line figure also comes in 91% lower than the prior-year quarter reported tally.

Results were adversely impacted by higher credit provisioning due to bleak economic conditions. Further, a lower net interest income, along with pressure on margin due to low rates, was a major drag.

However, decline in operating expenses and a higher fee income were tailwinds. Notably, a rise in mortgage banking revenues acted as a driving factor. Further, improvement in loans and deposits was another positive.

The company reported net income of $48 million for the quarter, which slumped 87% year over year.

Revenues Up, Expenses Fall, Loans & Deposits Escalate

Total revenues inched up 1% year over year to $1.16 billion in the first quarter. Further, the top-line figure surpassed the Zacks Consensus Estimate of $1.15 billion.

Net interest income (FTE basis) was $796 million, down 4% from the prior-year quarter. This downside resulted from a lower net interest margin (NIM), partly offset by an increase in average earnings assets. Also, net interest margin (NIM) contracted 25 basis points to 3.14%.

Non-interest income climbed 13% year over year to $361 million. This upsurge mainly stemmed from an increase in almost all components of income, partly muted by lower gain on sale of loans and leases and other non-interest income. Notably, mortgage banking income increased significantly.

Non-interest expenses edged down on a year-over-year basis to $652 million. This was chiefly due to lower professional, amortization of intangibles, net occupancy and other costs, mostly offset by elevated personnel costs, outside data processing and other service costs, marketing and equipment expenses.

Efficiency ratio was 55.4%, down from the prior-year quarter’s 55.8%. A decline in ratio indicates a rise in profitability.

As of Mar 31, 2020, average loans and leases at Huntington inched up 1% on a sequential basis to $75.7 billion. Also, average total deposits increased marginally from the prior quarter to $82.7 billion.

Credit Quality Disappoints

Net charge-offs were $117 million or an annualized 0.62% of average total loans in the reported quarter, up from the $71 million or an annualized 0.38% recorded in the prior year. Also, the quarter-end allowance for credit losses surged 85.5% to $1.6 billion.

Provision for credit losses went up significantly on a year-over year basis to $441 million on the coronavirus crisis. In addition, total non-performing assets totaled $586 million as of Mar 31, 2020, up 27.1%.

Capital Ratios

Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.47% and 10.81%, respectively, compared with the 9.84% and 11.25% reported in the year-ago quarter.

Tangible common equity to tangible assets ratio was 7.52%, down from 7.57% as of Mar 31, 2019.

Capital Deployment

During the March-end quarter, the company repurchased 7.1 million shares at an average cost of $12.38 for a total cost of $88 million.

Our Viewpoint

Huntington put up a disappointing performance during the January-March period. Though the company exhibited continued efforts in increasing loan and deposit balances, declining interest income and margin pressure are concerns. Further, deteriorating credit metrics on higher provisions due to the coronavirus crisis is another headwind.

Nevertheless, the company, which has a solid franchise in the Midwest, is focused on capitalizing on its growth opportunities. Additionally, lower expenses and higher mortgage banking income will likely continue being driving factors.

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

Regions Financial (RF - Free Report) reported adjusted earnings of 15 cents per share, missing the Zacks Consensus Estimate of 19 cents for the March-end quarter. The figure plummeted 59.5%, year over year. Results were affected by lower revenues resulting from a reduction in net interest income on lower rates and a deteriorating fee income. Additionally, elevated provisions were an undermining factor. Yet, lower non-interest expenses were the driving factor.

Fifth Third Bancorp (FITB - Free Report) recorded adjusted earnings of 13 cents per share, missing the Zacks Consensus Estimate of 23 cents for the first quarter amid the coronavirus scare. Results also compared unfavorably with the prior-year quarter’s earnings of $1.12 per share. Results excluded provision in excess of net charge-offs of 55 cents and other notable items of 9 cents.

Northern Trust Corporation (NTRS - Free Report) delivered earnings per share of $1.55, surpassing the Zacks Consensus Estimate of $1.45 for the first quarter, riding on higher fee income. Moreover, the reported figure climbed 5% year over year. Higher revenues, aided by a rise in fee income, were a driving factor. However, a decline in net interest margin was on the downside. Moreover, escalating operating expenses and provisions were major drags.

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