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Huntington (HBAN) Q3 Earnings Meet Estimates, Revenues Up

Huntington Bancshares Incorporated HBAN reported third-quarter 2017 adjusted earnings per share of 25 cents, in line with the Zacks Consensus Estimate. The reported figure excludes FirstMerit acquisition-related expenses of 2 cents per share.

Shares of Huntington Bancshares lost 1.1% in the pre-market trading session, reflecting investors’ pessimism. However, the price reaction during full-trading session will give a better idea.

The company witnessed higher revenues in the quarter. Continual growth in both loan and deposit balances was also recorded. Further, lower provisions and expenses were the tailwinds.

Net income jumped significantly year over year to $275 million during the quarter.

Revenues, Loans & Deposits Rise, Expenses Down

Huntington Bancshares’ total revenues on a fully taxable-equivalent (FTE) basis were $1.10 billion in the quarter, in line with the Zacks Consensus Estimate. Moreover, total revenues were up 17% year over year.

Net interest income (NII) came in at $771 million on a FTE basis, up 21% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 11 basis points (bps) in net interest margin to 3.29%.

Non-interest income climbed 9% year over year to $330 million. The upsurge was due to growth in almost all components of income except mortgage banking and insurance income.

Non-interest expenses dropped 4% year over year to $680 million. The decrease stemmed from a fall in professional services, personnel and outside data processing expenses. Excluding the impact of certain non-recurring items, non-interest expenses increased 18% year over year.

As of Sep 30, 2017, average loans and leases at Huntington jumped nearly 1% from the prior quarter to .3 billion. Also, average total deposits inched up 1% sequentially to $77.5 billion.

Credit Quality: A Mixed Bag

Net charge-offs were $43 million, up from $40 million in the year-ago quarter. The quarter-end allowance for credit losses, as a percentage of total loans and leases, rose to 1.10% from 1.06% in the prior-year quarter.

However, provision for credit losses declined 31% on a year-over year basis to $44 million. In addition, total non-performing assets totaled $387 million as of Sep 30, 2017, down from $475 million as of Sep 30, 2016.

Strong Capital Ratios

Huntington Bancshares’ capital ratios remained strong during the quarter.

Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.94% and 11.30%, respectively, compared with 9.09% and 10.40% in the year-ago quarter.

Tangible common equity to tangible assets ratio was 7.42%, up from 7.14% as of Sep 30, 2016.

Outlook for 2017

Total revenues for full-year 2017 are expected to be about 23%.

Management projects non-interest expenses growth to be nearly 13% for full-year 2017.

Average balance sheet growth is estimated to be over 20%, driven mainly by the FirstMerit acquisition. On a period-end basis, loan growth is anticipated in the range of 3-4%.

Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current low level of problem assets and credit costs.

Management anticipates NCOs to remain below the long-term normalized range of 35-55 bps.

Excluding certain items, the effective tax rate for 2017 is estimated in the range of 24-26%.

Our Viewpoint

Huntington Bancshares reported an encouraging quarter. The company has a solid franchise in the Midwest and is focused on capitalizing on growth opportunities. Further, it exhibits consistent efforts in increasing loan and deposit balances, aiding revenue growth. Additionally, we remain optimistic about the company’s several strategic actions, including acquisitions and consolidation of branches.

Huntington Bancshares Incorporated Price and EPS Surprise

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

Driven by top-line strength, Texas Capital Bancshares Inc. TCBI reported earnings per share of $1.12, outpacing the Zacks Consensus Estimate by a penny. Moreover, the bottom line came in 28.7% higher than the prior-year quarter figure of 87 cents.

First Horizon National Corporation FHN reported third-quarter 2017 adjusted earnings per share of 32 cents, surpassing the Zacks Consensus Estimate by 6.7%. Further, the figure reflects an increase of nearly 22% from the year-ago quarter.

Webster Financial WBS reported third-quarter 2017 earnings per share of 67 cents, which surpassed the Zacks Consensus Estimate of 64 cents. The reported figure was up 24.1% from 54 cents earned in the prior-year quarter.

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