Huntington Earnings: Net Interest Income Outlook Steady, Expenses Creeping Up

Key Morningstar Metrics for Huntington Bancshares

• Fair Value Estimate: $15.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Huntington Bancshares’ Earnings

Huntington Bancshares HBAN reported decent third-quarter results. Earnings per share of $0.35 beat the FactSet consensus of $0.32 and easily beat our own estimate of $0.25. The main differences between the results and our expectations were better provisioning and net interest income, or NII.

NII was actually up in the quarter—a surprising result, given the current environment, although it was driven by some one-time factors. NII is expected to decline in the fourth quarter, and full-year NII is expected to finish within the previous full-year guidance. While some uncertainty remains, it now seems likely that NII may bottom out next quarter and stabilize from there. This is broadly in line with our previous projections, and we feel comfortable with the current exit rate we have for 2024.

Expenses came in a little higher than expected, and Huntington management hinted that expenses could be up another 4% next year. This is slightly ahead of our previous projections, which were looking for a 3% growth rate. But even factoring this in, it would not have a material impact on our fair value estimate.

The bank was able to grow deposits in the quarter, and while deposit costs were below our expectations, management increased its estimate of the through-the-cycle deposit beta to a couple of percentage points above 40%.

Finally, while certain credit metrics like charge-offs and criticized assets were trending higher in the quarter, they are still only trending toward normalized levels. The bank is already meeting capital requirements under newly proposed regulations—one of the better positions under our coverage.

As we incorporate a slightly higher expense outlook and continue to refine our NII forecasts, which we do not expect to change materially, we do not anticipate a material change to our fair value estimate of $15 and believe Huntington stock remains undervalued.