Huntington Bancshares Inc.
) reported fourth-quarter 2011 earnings of 14 cents per share, in
line with the Zacks Consensus Estimate. Results were slightly down
from 16 cents earned in the prior quarter but significantly ahead
of prior-year quarter's earnings of 5 cents.
Huntington's earnings were positively impacted by higher
net-interest revenues and lower non-interest expenses. Yet, a fall
in fee income and a modest rise in provision for loan losses offset
For full year 2011, Huntington's earnings per share came in at
59 cents per share, a penny below the Zacks Consensus Estimate of
60 cents but significantly up from 19 cents earned in 2011.
Huntington reported net income of $126.9 million in the reported
quarter, down 12% from $143.4 million reported in the prior
quarter. However, net income compared favorably with $122.9 million
reported in the year-ago quarter. Results included a $9.7 million
pre-tax gain on early extinguishment of debt and a $6.4 million
pre-tax Visa-related derivative loss.
For full year 2011, Huntington reported net income of $542.6
million, substantially up from $312.3 million reported in 2010.
For the reported quarter, Huntington's total revenue on a
) basis was $647.9 million, down 3% from the prior quarter, driven
by fall in non-interest income which was partly mitigated by a rise
in interest income. The revenue figure also fell short of the Zacks
Consensus Estimate of $653.0 million.
For full year 2011, Huntington total revenue on a FTE basis was
$2.6 billion, down 2% year-over-year but consistent with the Zacks
Quarter in Detail
Net interest income (
) grew 2% sequentially to $415.0 million, primarily due to increase
in average earning assets and net interest margin (
). Growth in average earnings assets were driven by an increase in
NIM was 3.38%, up 4 basis points (bps) sequentially mainly due
to improved deposit pricing and the addition of low cost deposits.
However, the positives were partly offset by lower loan and
securities yields, reduced derivative income and a shift to lower
yield, higher quality credits.
However, Huntington's non-interest income dipped 11%
sequentially at $229.4 million. The decrease resulted from reduced
gain on sale of loans, fall in electronic banking income and
service charges on deposit accounts, primarily driven by the
implementation of lower debit card interchange fee structure
authorized in the Durbin Amendment of the Dodd-Frank Act. These
were partly mitigated by a rise in mortgage banking income and
Yet, non-interest expenses at Huntington inched down 2%
sequentially to $430.3 million. The decrease was driven by a gain
on the early extinguishment of debt and seasonal decrease in
marketing expenses. However, these positives were partially offset
by an increase in outside data processing and other services as
well as a rise in equipment expenses.
Credit quality continued to improve but at a slower rate. While
net charge-offs, nonperforming assets and level of criticized
commercial loans reported a decline, provision for credit losses
slightly increased in the quarter.
Net charge-offs (NCOs) at Huntington were down 7% sequentially
and 51% year over year to $83.9 million. NCOs were 0.85% of average
loans and leases, down from 0.92% in the prior quarter and 1.82% in
the year-ago quarter.
Total non-performing assets (NPA) also dropped 4% sequentially
and 30% year over year to $590.3 million. The NPA ratio improved to
1.51% from 1.57% reported in the prior quarter and 2.21% a year
However, provision for credit losses was $45.3 million, up 4%
sequentially. With the gradual migration toward normal levels,
credit quality improved but at a slower pace. The company
experienced a smaller reduction of the allowance for credit losses
(ACL) than in the prior quarter. However, this was partly offset by
the benefit from a lower level of net charge-offs.
Average loans and leases at Huntington increased 1%
sequentially, primarily reflecting a rise in commercial and
industrial loans (C&I), partly offset by lower automobile
Average deposits increased 3% from the prior quarter as a result
of a rise in demand deposits and average money market deposits,
partially mitigated by decrease in core certificates of
Huntington's capital ratios reflected the impact of higher
period end risk-weighted assets. The Tier 1 common risk-based
capital ratio at quarter end was 10.00%, down from 10.17% at the
end of the prior quarter. Further, regulatory Tier 1 and
Total risk-based capital ratios were 12.11% and 14.77%,
respectively, down from 12.37% and 15.11%, respectively, at the end
of the prior quarter.
While uncertainty and volatility surrounding the economy
continues, Huntington's management remains encouraged with some of
the positive signals. Revenue headwinds will continue, yet
management expects to combat that with strategic efforts and
Over 2012, net interest income is likely to show modest
improvement from the fourth quarter level. Though momentum in loan
and low cost deposit growth will likely persist, it is expected to
be mostly offset earlier in the year by a downward pressure on the
net interest margin due to the anticipated continued mix shift to
lower-rate higher quality loans and lower securities reinvestment
rates given the low absolute level of interest rates and shape of
the yield curve.
Particularly, the strategic initiatives of Huntington are
expected to aid in C&I loan growth. Residential mortgages and
home equity loans are anticipated to show modest growth, with
commercial real estate loans likely to experience slowing
Increase in total loans is projected to modestly surpass growth
in total deposits as result of the company's focus on overall cost
of funding and the continued shift towards low- and no-cost demand
deposits and money market deposit accounts.
Reflecting the impact of Huntington's cross-sell and product
penetration initiatives throughout the company, non-interest income
is expected to show a modest increase throughout 2012 from the
fourth quarter levels, driven by increased contribution from key
fee income categories.
Huntington's expenses are expected to increase slightly. While
the company's focus on improving efficiencies will continue,
additional regulatory costs and expenses related to strategic
actions would offset that improvement.
Non-accrual loans and NCOs are expected to continue to decline
throughout the year. However, given the uncertain and uneven nature
of the economic recovery, there could be some quarterly
Concurrent with the earnings release, Huntington's Board of
Directors declared a quarterly cash dividend of $0.04 per share on
its common stock. The dividend is payable on April 2, 2012, to
shareholders of record on March 19, 2012.
One of the closest peers of Huntington,
Northern Trust Corporation's
) fourth-quarter 2011 earnings of 67 cents per share missed the
Zacks Consensus Estimate by a penny. In the quarter, earnings were
impacted by restructuring, acquisition and integration related
expenses, though partially offset by benefit from the reduction of
an indemnification liability related to
The other company in its peer group,
TCF Financial Corporation
) will be releasing its earnings on January 24.
Huntington remains focused on capitalizing on growth
opportunities. Strategic initiatives are right on track and the
company is poised to benefit from an economic rebound. Yet an
unsettled economic environment coupled with regulatory issues will
likely restrict earnings improvement in the upcoming quarters.
Huntington currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating. However, considering the
fundamentals, we have a long-term Neutral recommendation on the
HUNTINGTON BANC (
): Free Stock Analysis Report
NORTHERN TRUST (
): Free Stock Analysis Report
TCF FINL CORP (TCB): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
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