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Huntington Bancshares Inc (HBAN) Q1 2024 Earnings Call Transcript Highlights: Key Financial ...

  • GAAP Earnings Per Share: $0.26

  • Adjusted EPS: $0.28

  • Loan Growth: $1.6 billion increase year-over-year

  • Deposit Growth: $7.9 billion increase year-over-year

  • Common Equity Tier 1: 10.2%

  • Adjusted Common Equity Tier 1: 8.5%

  • Net Interest Income: Decreased by $27 million to $1.3 billion

  • Net Interest Margin: Declined to 3.01%

  • Net Charge-offs: 30 basis points

  • Allowance for Credit Losses: Stable at 1.97%

  • Noninterest Income: Increased by $62 million to $467 million

  • Non-interest Expense: Decreased by $211 million

Release Date: April 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you expand on the lower end of your NII guide now for 3 cuts and your conservative approach on deposit betas? A: Zachary J. Wasserman, CFO & Senior EVP, explained that the NIM outcome is similar to previous views, albeit slightly lower due to a longer expected pause before rate reductions by the Fed, leading to higher deposit funding costs. The strong deposit volumes also contribute to this dynamic. The shift in market expectations for rate cuts has extended the timeline for substantive down beta actions, affecting the timing and overall interest bearing liability costs.

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Q: How does the accelerating loan growth impact your financial strategy? A: Stephen D. Steinour, Chairman, President & CEO, noted that the robust commercial loan pipeline supports a healthy outlook for the second quarter and beyond. The bank aims to be at the upper end of loan growth guidance, influenced by new market expansions and the addition of banking teams in the Carolinas and Texas.

Q: What are your expectations for deposit costs and NII guidance amidst a higher for longer rate environment? A: Zachary J. Wasserman mentioned that the primary reason for maintaining the NII guide of down 2% to up 2%, despite a higher rate environment, is the incrementally higher deposit costs. However, the trajectory for growing interest income from Q1 through the rest of the year remains solid, supporting expanding revenue and profit growth.

Q: Can you discuss the demand and utilization trends supporting your confidence in loan growth acceleration? A: Stephen D. Steinour highlighted the strength in the commercial pipeline, particularly in high probability and close levels, which is very strong relative to the past five quarters. The bank is also seeing good growth in business banking and benefits from new initiatives and market expansions, which bolsters confidence in achieving the upper end of loan growth guidance.

Q: How are you managing deposit pricing in the current competitive environment to support loan growth? A: Zachary J. Wasserman explained that the competitive intensity in the market remains consistent, and Huntington's strategy is to price deposits competitively but not lead the market. The focus is on driving deposit growth through customer acquisition, supporting the bank's accelerating loan growth.

Q: What is your outlook on fee income growth and the main drivers behind it? A: Zachary J. Wasserman expects an acceleration in fee income, projecting a full-year growth of 5% to 7%. Key drivers include capital markets, payments, and wealth management. Commercial banking-related revenues and wealth management have shown strong performance, and the bank anticipates continued growth in these areas throughout the year.

Q: Could you provide insights into your credit quality outlook and any specific areas of focus or concern? A: Brendan A. Lawlor, Chief Credit Officer, noted the stability across all credit metrics and a particular focus on managing the commercial real estate office portfolio, which has been reduced significantly. Stephen D. Steinour added that the bank has been conservative with reserves and expects to continue managing loans with a moderate- to low-risk appetite.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.