Huntington Bancshares upgraded to buy with analyst seeing 'multiple pockets of potential loan growth'

By Steve Gelsi

Huntington has the highest growth expectations of large regional lenders, analyst says

Jefferies analyst Ken Usdin on Monday upgraded Huntington Bancshares to buy from hold due to its attractive price-to-earnings ratio compared with its peers, as well the large regional bank's potential loan and deposit growth.

Huntington Bancshares (HBAN) stock was up by 2.3% after Usdin raised his rating on the company, which ranks as the 20th largest U.S. bank by assets at $189 billion as of Dec. 31.

Even with a "decent" stock performance of up 6.9% so far in 2024, the bank's forward price-to-earnings (P/E) ratio of 9.0 based on 2025 estimated earnings per share remains below the 9.3 P/E ratio of the large regional group, Usdin said.

The bank also offers a 4.6% dividend yield, and presents an "attractive risk/reward' to its peers.

Usdin's price target of $16 a share implies a price-to-earnings ratio of 10.5, excluding a reserve release of $1.50 a share. The 10.5 figure is still conservative relative to the stock's 10-year average of 10.8.

Jefferies 2025 earnings per share target for Huntington Bancshares is 7% above the consensus analyst estimate.

Usdin said he expects the bank's loan growth and fixed-rate repricing on loans and securities to give it a boost.

"HBAN has multiple pockets of potential loan growth," Usdin said.

Those include existing strengths in dealer/distribution finance; new markets in North Carolina, South Carolina and Texas, new business lines in fund finance, healthcare, and Native American finance, and a potential to reopen the indirect auto channel as spreads improve, he said.

Drilling down into other aspects of its business, Huntington Bancshares has "modest exposure" to improved capital markets activity and has provided the most conservative cost-growth projection for 2024 among big regional banks.

"HBAN has the highest growth expectation of all large regionals for 4.5% growth in 2024, which should limit upside risk on the expense front," Usdin said.

On credit quality, the bank's commercial real-estate exposure is "relatively small" at about 10% of loans and the office book (1.5% of loans) has a 10% reserve. Credit loss expectations remain low as well.

Also read: Bank of America faces 'rate trap' as UBS downgrades megabank to neutral from buy

-Steve Gelsi

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04-08-24 1023ET

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