Huntington (HBAN) Q4 Earnings and Revenue Missed, Loans Fall

Huntington Bancactions incorporated HBAN reported fourth-quarter 2021 adjusted earnings per share of 36 cents, missing Zacks’ consensus estimate of 37 cents. This excluded certain notable after-tax items.

– Zacks

Results were impacted by $177 million of pre-tax expenses related to the acquisition of TCF and $10 million pre-tax expenses related to the termination of a strategic distribution relationship. In addition, lower capital ratios created a headwind. Nonetheless, provision benefits and net interest income growth were positive.

The company reported net income of $401 million in the quarter, compared with $316 million in the year-ago quarter.

For 2021, net income available to common shareholders was $1.15 million, compared to $717 million reported in 2020.

Income increases, expenses increase

Total revenue (based on FTEs) increased 33% year over year to $1.65 billion in the fourth quarter. However, the top line missed the consensus estimate of $1.69 billion.

In 2021, total revenue increased 24% from the previous year’s level to approximately $6 billion. However, the reported figure missed the consensus mark of $6.07 billion.

Net interest income (FTE basis) was $1.14 million, up 37% from the prior year quarter. The increase was driven by an increase in average earning assets, partially offset by a lower net interest margin (NIM), which contracted 10 basis points (bps) to 2.84%.

Non-interest revenue climbed 26% year over year to $515 million. The increase was primarily driven by higher service fees on deposit accounts, card and payment processing, rental income and capital market fees.

Non-interest expense increased 62% year over year to $1.22 billion. This was mainly due to higher costs for professional services, costs for external data processing and other services, as well as marketing expenses.

The efficiency ratio was 73%, up from 60.2% in the prior year quarter. A rise in the ratio indicates a decline in profitability.

As of December 31, 2021, Huntington’s average loans and leases declined slightly on a sequential basis to $109.9 billion. Average total deposits were flat from the prior quarter at $142.3 billion.

Credit quality: a mixed bag

Net write-offs were $34 million or 0.12% annualized of average total loans in the quarter, down from $112 million or 0.55% a year earlier. In the fourth quarter, the company reported a credit provision of $64 million, compared to a provision of $103 million in the year-ago quarter.

However, the quarter-end provision for credit losses increased 12.9% to $2.11 billion. Additionally, total non-performing assets were $750 million as of December 31, 2021, compared to $563 million in the prior year quarter.

Lower capital ratios

Common equity Tier 1 risk-based capital ratio and Tier 1 regulatory risk-based capital ratio were 9.33% and 10.99%, respectively, compared to 10% and 12.47% reported in the quarter of the previous year. The common equity to tangible assets ratio was 6.88%, down from 7.16% as of December 31, 2020.

Capital deployment

The company repurchased $150 million of common stock in the fourth quarter and $150 million remains under the current authorization of $800 million.

Our point of view

Huntington performed decently in the late December quarter. Improving credit metrics on lower provisions due to the recovering economy is a tailwind.

However, pressure on margins and high expenses remain a concern.

Currently, Huntington wears a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other banks

State StreetSTT’s fourth-quarter 2021 adjusted earnings of $2.00 per share beat Zacks’ consensus estimate of $1.91. STT’s net profit was 18.3% higher than the previous year’s level.

State Street’s results reflect gains in investment services, provisioning benefits and improved fee income. However, higher spending, lower net interest income and lower interest rates were the slowing factors.

BOK FinancialBOKF’s earnings per share of $1.71 beat Zacks’ consensus estimate of $1.81. Net income decreased by 22.6% compared to the prior year quarter.

Results were undermined by lower fees and commissions and lower loan balances. Nonetheless, lower expenses, higher net interest income and benefit from provisions were tailwinds for BOKF.

ETF CompanyThe ETF’s fourth-quarter 2021 adjusted earnings per share of 30 cents hit Zacks’ consensus estimate. ETF net income reflects a 7.1% increase over the prior year quarter.

FNB Corporation’s results were mainly supported by higher fee income, lower expenses and lower provisions. However, a fall in the NII was the undermining factor.

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