Huntington's Strategic Initiatives Look Promising: Is the Stock a Buy?
At the Barclays Global Financial Services Conference, Huntington Bancshares Incorporated HBAN provided an update on its progress with strategic initiatives and the rising trend of loan and deposit balances.
Let’s delve deeper.
HBAN’s Rising Loan and Deposit Balances
Huntington continues to show strength in its organic growth. HBAN’s total loan balance recorded a four-year (ended 2023) compound annual growth rate (CAGR) of 12.8%. This was mainly driven by the strong performance of commercial and consumer portfolios. The rising trend continued throughout the first half of 2024.
As of Aug. 31, 2024, the bank experienced a net increase of $0.8 billion in average loans. This growth was driven by a $1.1 billion rise in Commercial & Industrial balances, supported by expansion into new geographies and verticals. Additionally, consumer balances grew $0.8 billion, with notable increases in auto, RV/Marine and residential mortgage segments. However, this was partially offset by a $0.4 billion decline in Commercial Real Estate balances and a $0.8 billion seasonal reduction in the Distribution Finance business.
On the deposit side, the company’s total deposits saw a four-year (ended 2023) CAGR of 16.4%. The metric rose in the first half of 2024 compared with the same period in 2023.
The bank witnessed year-over-year growth in its primary bank relationships (PBR). The consumer PBR was up 2% and the business PBR rose 4%. Cumulatively from the first quarter of 2023, the deposits have increased more than $9 billion on a year-over-year basis. Its focus on core commercial deposits has contributed nearly $3 billion in overall deposit growth quarter to date ending Aug. 31, 2024.
HBAN's Expansion Into High-Growth Regions
The company is expanding its footprint and capabilities in the Carolinas and Texas regions. It is progressing well with its expansion strategy in Carolinas. The company has established five units and 120 relationships with an emphasis on verticals like the middle market, Small Business Administration and healthcare lending.
The company plans to add more than 350 employees across varied business divisions and launch roughly 55 retail branches within the next five years.
In March 2024, HBAN announced its plans to expand its commercial banking business in Texas to extend its reach in the Lone Star State. This was followed by the company’s expansion efforts in the Dallas-Fort Worth area earlier this year.
Texas ranks second in GDP, implying significant economic activity, business opportunities and demand for banking services. It also holds the eighth position among the world’s largest economies, providing a tremendous number of growth opportunities. Hence, Texas presents an attractive market for HBAN.
Such expansion efforts into high-growth markets position HBAN to gain significant market share and enhance its profitability.
HBAN’s NII & Non-Interest Income Growth Trend
Huntington’s NII has witnessed improvement over the past few years. NII recorded a four-year CAGR of 14.1% (2019-2023). Although the metric declined in the first half of 2024, the company expects its NII to grow in the long run due to an increase in earning assets and effective interest rate management through flexible hedging strategies.
Management expects NII to decline 1-4% in 2024 from $5.48 billion in 2023. Nonetheless, the company expects the metric to grow on a sequential basis for the remaining quarters of 2024. HBAN projects accelerated NII expansion in the second half of 2024 and into 2025.
NII Trend
Image Source: HBAN Financials
Some other banks, such as Synovus Financial Corp. SNV and PNC Financial Services Group, Inc. PNC, updated their NII guidance at the Barclays conference. SNV announced that its third-quarter 2024 NII is likely to be impacted by the muted loan growth environment and the impact of expected Federal Reserve rate cuts. PNC expects to report its third-quarter 2024 NII at the higher end of its previously projected 1-2% growth range.
The company’s non-interest income witnessed a three-year (2020-2023) CAGR of 6.5%. The metric witnessed a downtrend in the first half of 2024.
HBAN’s non-interest income, excluding notable items, is expected to grow in the range of 5-7% from $1.88 billion in 2023, driven by continued execution on key focus areas, including capital markets, payments and wealth management.
Should You Consider Buying HBAN Stock?
Huntington is leveraging robust liquidity to execute organic growth initiatives inclusive of new geographies and commercial verticals to gain market share and increase profitability. Also, its high-quality loan growth and expanding deposit balance positions it well for growth in the upcoming period. Further, the company’s efforts to boost NII will aid its financials.
HBAN has also been focused on inorganic expansion over the past few years. In 2022, the company acquired Capstone Partners (which enhanced the complementary capabilities of the capital markets business) and Torana (to enhance digital capabilities and enterprise payments strategy). These planned initiatives are expected to drive significant revenue synergies and support continued growth.
Therefore, considering the company’s strong fundamentals, progress in strategic initiatives and upbeat long-term prospects, investors should think about investing in Huntington for solid long-term gains.
Currently, HBAN carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
In the past month, shares of Huntington have risen 5.5% compared with the industry’s growth of 4.6%.
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Huntington Bancshares Incorporated (HBAN) : Free Stock Analysis Report