We have reaffirmed our Neutral recommendation on
Huntington Bancshares Incorporated
) based on its fundamentals and capital deployment activities in
light of the current economic environment.
Third Quarter Result
Huntington's earnings of 19 cents per share in the third quarter
of 2012 included a state deferred tax valuation allowance benefit
of 2 cents per share. Excluding that benefit, the results were in
line with the Zacks Consensus Estimate of 17 cents.
The company experienced augmentation in mortgage banking revenue
and in average earning assets, though the continued pressure on
net interest margin partly offset that benefit. Moreover,
expenses increased in the quarter.
Huntington has a solid franchise in the Midwest and is focused on
capitalizing on its growth opportunities. The company has made
fundamental progress since January 2009 and reorganized its
business model, implemented a strategic planning process, and
strengthened its management team to drive expansion.
Cross-sell and product penetration initiatives throughout the
company are expected to boost its top-line figures. Moreover, the
Fidelity Bank acquisition and the in-store banking deal augur
well going forward. Also, with robust capital levels, the company
is well poised to return value to shareholders through share
buybacks and dividends.
Yet, revenue headwinds are a concern for Huntington amidst a
tepid economic recovery, low interest rate and a tough regulatory
environment. The pressure on net interest margin is likely to
continue due to the anticipated competitive pressures on loan
pricing, as well as lower rate securities through reinvestment,
and declining positive impacts from deposit repricing.
Further, with an expanding expense base, we remain somewhat
skeptical about its ability to augment earnings in the quarters
ahead. Hence, the risk-reward profile seems balanced for
Huntington and we reaffirm our Neutral recommendation on the
Further, Huntington shares maintain a Zacks #3 Rank, which
translates into a short-term Hold recommendation. Its closest
peers such as
TCF Financial Corporation
Commerce Bancshares Inc.
) also have a Zacks #3 Rank.
COMMERCE BANCSH (CBSH): Free Stock Analysis
HUNTINGTON BANC (HBAN): Free Stock Analysis
TCF FINL CORP (TCB): Free Stock Analysis
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