Huntington Earnings: Revenue Under Additional Pressure as Deposits Grow

Huntington Bancshares Stock at a Glance

• Fair Value Estimate: $15
• Morningstar Rating: 4 stars
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow

Huntington Bancshares Earnings Update

Narrow-moat-rated Huntington Bancshares HBAN reported decent second-quarter results. Earnings pressure continues to build as the bank downgraded its outlook for net interest income growth once again, to 3%-5% from 6%-9% previously.

On the positive side, deposits grew during the quarter and are essentially flat for the year, and the pricing on interest-bearing deposits was better than we had expected (2.06% versus our expectation of 2.3%). Pricing and balances of deposits are holding up for Huntington, and the bank is still set to see revenue growth in 2023 compared with 2022.

We had already been forecasting revenue at the lower end of previous guidance, so we don’t expect to make material changes to our overall revenue forecast. Meanwhile, expenses are trending as expected.

Commentary on potential NII trends in 2024 was also encouraging: Management expects that it could hold the line on net interest margins under multiple rate scenarios, indicating that NII is set to stabilize in the next couple of quarters and be more resilient going forward.

Credit remains benign, with charge-offs, criticized assets, and delinquencies all remaining range-bound. The bank continues to build capital, as we expected, with its adjusted common equity Tier 1 ratio (including accumulated other comprehensive income) now at 8.1%, in excess of its minimum requirements.

We do not expect a material change to our $15 fair value estimate as we incorporate these results. We believe the shares remain moderately undervalued.