We have reaffirmed our Neutral recommendation on
Huntington Bancshares Inc.
). Our decision is based on its fundamentals and the strategic
initiatives to boost its business organically as well as through
acquisitions and the recent in-store banking deal. The decision
takes into consideration the current economic and regulatory
environment as well.
After reporting in-line results in the prior quarter, Huntington
Bancshares came up with better-than-expected results in the first
quarter of 2012. The company reported earnings of 17 cents per
share, surpassing the Zacks Consensus Estimate by 3 cents.
Results reflected a revenue increase, primarily driven by an
expansion of non-interest income. Credit quality also continued to
improve. However, an increase in expenses partly offset the
Huntington has a solid franchise in the Midwest. The company is
focused on capitalizing its growth opportunities and its strategic
efforts are right on track. The business model has transformed into
product-specific businesses from a geographical approach in order
to better align itself.
Its cross-sell and product penetration initiatives are expected
to boost top-line figures. Other strategic actions include deposit
growth emphasis, loan/deposit pricing discipline, and de-risking of
the balance sheet.
Moreover, in an effort to increase its presence in Michigan,
Huntington announced in May that it has partnered with Meijer to
offer branch offices in several Meijer stores. An in-store banking
agreement for 10 years has been signed between Huntington and
Meijer that will provide Huntington over 200 branches in
Michigan. This reflects over 65% increase in branch offices
and more than 500 job additions in the state.
The company has also acquired Fidelity Bank in a Federal Deposit
Insurance Corporation (FDIC) assisted deal in the first quarter of
2012 to boost its footprint in Southeast Michigan. The transaction
added over 18,000 Fidelity Bank customers to Huntington.
We believe that such efforts will help the company in gaining
market share and thereby enhance its profitability in the long run.
Notably, following a turnaround phase after the break out of the
financial crisis, Huntington is now focused on capitalizing on
growth opportunities. The share buyback authorization following the
Fed's approval inspires investors' confidence in the stock.
Yet, a tepid economic recovery, low interest rate environment
and regulatory issues will likely restrict any robust development
in earnings in the upcoming quarters. Moreover, with a growing
expense base, we remain somewhat skeptical about the company's
ability to grow its earnings substantially in the quarters
We believe that the risk-reward profile of Huntington is
currently balanced and hence, we have reiterated our Neutral
recommendation on its shares.
Huntington currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating. One of Huntington's peers,
Northern Trust Corporation
) retains a Zacks #3 Rank.
HUNTINGTON BANC (HBAN): Free Stock Analysis
NORTHERN TRUST (NTRS): Free Stock Analysis
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