No Surprises in Huntington’s Fourth-Quarter Results; Credit Still Looking Solid

Fair value estimate expected to remain at $16 per share.

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Huntington Bancshares Inc
(HBAN)

Narrow-moat-rated Huntington Bancshares HBAN reported fourth-quarter earnings per share of $0.42, just ahead of the FactSet consensus estimate of $0.40 and essentially in line with our estimate of $0.41. Revenue was $1.96 billion, in line with our estimate of $1.93 billion, while expenses of $1.08 billion were also in line with our expectations.

The bank’s 2023 outlook held no surprises. Guidance for average loan growth of 5%-7% shows some of the slowdown we’ve been looking for, while deposits are likely to be slightly down to slightly up on an end-of-period basis as competition for deposits remains intense. The net interest income outlook of 8%-11% growth is just above what we had penciled in, while the flattish fee growth outlook is just below our previous forecast, resulting in a roughly neutral effect on our revenue outlook. Expense guidance for 2%-4% core growth, along with another $60 million for the Capstone and Torana acquisitions, fits squarely within our expectations. As such, we do not expect any material changes to our own forecasts or our $16 fair value estimate. The bank continues to meet our expectations; however, after the shares’ outperformance over the last six months, Huntington is no longer one of the cheaper regionals under our coverage.

Interest-bearing deposit costs came in roughly where we expected, at 88 basis points compared with our forecast of 86 basis points, although deposits are starting to shift into interest-bearing balances at an accelerated rate. There was not a lot of action on the credit side of things. The net charge-off ratio increased by only 2 basis points, while the reserve ratio increased by a single basis point. Nonaccrual assets were down in the quarter. Management believes net charge-offs will likely still be on the low end of their through-the-cycle range of 25-45 basis points. In other words, we aren’t seeing much credit strain yet.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Eric Compton, CFA

Sector Director
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Eric Compton, CFA, is a sector director, AM Technology, for Morningstar*. He covers a variety of hardware and software related technology names across several industries while overseeing the technology team.

Before joining Morningstar in 2015, Compton was a business analyst for ESIS, a global provider of risk management products and a subsidiary of ACE Group. Before becoming technology sector director in late 2023, he was an equities strategist and covered the U.S. and Canadian banking sectors. Eric joined Morningstar in 2015 as an associate on the financials team, covering banks for eight years before transitioning to the technology team.

Compton holds a bachelor's degree in applied health science from Wheaton College and a master’s degree in business administration, with high honors, from University of Chicago’s Booth School of Business. He also holds the Chartered Financial Analyst® designation.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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