Huntington Bancshares Incorporated (NASDAQ:HBAN) is a diversified regional bank holding company headquartered in Columbus, Ohio. With a history dating back to 1866, Huntington has established itself as a leading financial institution in the Midwest, offering a comprehensive suite of banking, lending, wealth management, and capital markets services to its growing customer base.
Business Overview: A Legacy of Growth and Expansion
Huntington's business model has evolved significantly since its founding in 1866. The company was organized under Maryland law as a holding company for The Huntington National Bank in 1966, marking a pivotal moment in its corporate structure. Over the decades, Huntington has pursued a strategy of both organic growth and strategic acquisitions to expand its footprint across the Midwest.
A notable milestone in the bank's expansion was the 2010 acquisition of Sky Financial Group, which substantially increased Huntington's presence in Ohio, Pennsylvania, and West Virginia. This acquisition exemplifies the company's approach to growth through targeted mergers and acquisitions.
Huntington's resilience was tested during the 2008-2009 financial crisis. While the bank faced challenges, including regulatory scrutiny and the need to strengthen its capital position, it weathered the storm relatively well due to its conservative risk management practices and diversified business model. The company worked closely with regulators to address issues and emerged from the crisis in a stronger competitive position.
Throughout its history, Huntington has maintained a focus on serving the needs of its retail, small business, and commercial customers. The bank has consistently invested in technology to enhance the customer experience while maintaining a network of traditional branch locations. This dual approach has allowed Huntington to cater to evolving customer preferences while retaining the personal touch that has been a hallmark of its service.
In recent years, Huntington has further diversified its revenue streams by building out its wealth management, capital markets, and specialty lending capabilities. This strategic expansion of services has positioned the bank to better serve its clients and compete effectively in an evolving financial landscape.
Financial Performance: Delivering Consistent Growth and Profitability
Huntington's financial performance has been impressive, showcasing the bank's ability to drive organic growth and maintain strong profitability. For the full year 2024, the company reported net income of $1.41 billion, or $1.23 per diluted share, a 10.8% increase compared to the prior year. This strong earnings performance was driven by a 4.8% increase in net interest income, as well as a 2.0% rise in noninterest income.
Financials
The bank's balance sheet remains healthy, with total assets of $200.5 billion as of September 30, 2024. Huntington's common equity Tier 1 (CET1) capital ratio stood at 10.5% at the end of 2024, well above the regulatory minimum, providing ample cushion for future growth and potential economic headwinds.
For the most recent quarter, Huntington reported revenue of $1,954,000,000 and net income of $530,000,000. Operating cash flow (OCF) for the quarter was $1,484,000,000, while free cash flow (FCF) stood at $1,457,000,000. The increase in revenue and net income compared to the prior year quarter was primarily driven by higher net interest income and noninterest income, partially offset by an increase in provision for credit losses and noninterest expense.
Loan and Deposit Growth: Outpacing the Industry
One of the key highlights of Huntington's performance has been its ability to deliver exceptional loan and deposit growth, consistently outpacing its regional banking peers. In 2024, the company reported average loan growth of 5.7% year-over-year, driven by broad-based strength across its commercial and consumer lending portfolios. This included significant contributions from both its existing business lines as well as the new initiatives in the Carolinas and Texas.
On the deposit side, Huntington also delivered impressive results, with average deposit growth of 6.5% year-over-year. The bank's focus on building stable, low-cost core deposits has been a critical component of its funding strategy, enabling it to support its lending activities while maintaining a strong liquidity position.
Diversified Fee Income Streams: Powering Revenue Growth
In addition to its robust interest income performance, Huntington has also made strides in diversifying its revenue mix through the growth of its fee-based businesses. In 2024, the company's noninterest income accounted for 28% of total revenue, up from 26% in the prior year.
Key drivers of this fee income growth included strong performances in Payments and Cash Management, Wealth and Asset Management, and Capital Markets. For example, the bank's Payments and Cash Management business saw an 8% year-over-year increase in revenue, while Wealth and Asset Management fees grew by 8% and Capital Markets revenue surged by 74%.
Disciplined Risk Management: Maintaining a Moderate-to-Low Risk Appetite
Huntington has a well-established reputation for maintaining a disciplined approach to risk management, which has served the bank well through various economic cycles. The company's aggregate moderate-to-low risk appetite is reflected in its consistently strong credit quality metrics, with net charge-offs remaining low at 30 basis points in 2024.
The bank's allowance for credit losses totaled $2.44 billion, or 1.88% of total loans, as of September 30, 2024, providing ample coverage against potential loan losses. Huntington's proactive risk management practices have enabled it to navigate economic uncertainties while continuing to grow its business in a prudent manner.
Liquidity
Huntington maintains a strong liquidity position, which is crucial for supporting its lending activities and meeting regulatory requirements. The bank's liquidity coverage ratio and net stable funding ratio both exceed regulatory minimums, providing a solid foundation for future growth and resilience in times of economic stress. As of the most recent quarter, Huntington reported a cash position of $12,600,000,000.
Strategic Initiatives and Outlook: Momentum Building for the Future
Looking ahead, Huntington is well-positioned to build on its momentum and continue delivering sustainable growth. The bank's strategic initiatives, including its expansion into the Carolinas and Texas, as well as the development of its specialized lending verticals, are expected to drive further loan and deposit growth in the coming years.
For 2025, the company has provided guidance for average loan growth between 5% and 7%, and average deposit growth between 3% and 5%. Huntington also anticipates net interest income growth of 4% to 6% and noninterest income growth of 4% to 6% for the full year, reflecting the bank's ability to capitalize on its diverse revenue streams. Additionally, expense growth is expected to be 3.5% to 4.5%, net charge-offs are projected to be between 25 to 35 basis points, and the effective tax rate is anticipated to be approximately 19% for the full year 2025.
In the first quarter of 2025, Huntington expects average loan balances to grow approximately 2% sequentially, while average deposits are expected to remain relatively stable. Net interest income on a dollar basis is projected to be 2% to 3% lower than Q4 2024, and fee revenues are expected to be approximately $500 million, normalizing from the record level in Q4 2024. Expenses are anticipated to be down approximately 2% from Q4 2024.
Business Segments
Huntington operates through two main business segments: Consumer Regional Banking and Commercial Banking.
The Consumer Regional Banking segment focuses on providing a range of banking products and services to consumers, including residential mortgage loans, automobile loans, home equity loans and lines of credit, and other consumer loans. The segment also offers deposit products such as demand deposits, money market deposits, savings and other domestic deposits, and certificates of deposit. For the first nine months of 2024, this segment reported net interest income of $3.01 billion, noninterest income of $968 million, and net income attributable to Huntington of $1.10 billion.
The Commercial Banking segment provides various banking products and services to business and corporate customers, including commercial and industrial loans, commercial real estate loans, and lease financing. On the deposit side, the segment offers demand deposits, money market deposits, and other commercial deposits. For the first nine months of 2024, the Commercial Banking segment reported net interest income of $1.58 billion, noninterest income of $490 million, and net income attributable to Huntington of $853 million.
Additionally, Huntington's Treasury & Other function includes the company's investment securities portfolio, derivative activities used for asset/liability management purposes, fee income and expenses associated with the company's technology and operations, and other unallocated assets, liabilities, revenue, and expense. This segment recorded net interest income of $642 million, noninterest income of $23 million, and net income attributable to Huntington of $541 million in the first nine months of 2024.
Risks and Challenges
While Huntington's growth story is compelling, the bank is not without its risks and challenges. The highly competitive regional banking landscape, evolving regulatory environment, and potential economic headwinds could all pose challenges to the company's continued success. Additionally, the bank's geographic expansion and diversification into new lending verticals introduce operational and integration risks that must be carefully managed.
Conclusion
Huntington Bancshares has demonstrated its ability to navigate a dynamic banking environment and deliver consistent growth and profitability. The company's multi-faceted expansion strategy, coupled with its focus on diversifying revenue streams and maintaining disciplined risk management, position it well for continued success in the years ahead. As Huntington continues to build momentum across its core Midwest markets and targeted growth initiatives, it remains an intriguing investment opportunity for those seeking exposure to a well-run regional banking franchise.