Balanced View on Huntington - Analyst Blog

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On May 27, 2013, we reiterated our Neutral recommendation on Huntington Bancshares Inc. ( HBAN ) based on its healthy capital position and improving credit quality. But revenue headwinds are a concern amid a tepid economic recovery, low interest rate and a tough regulatory environment. Further, with the anticipation of an expanding expense base, we remain somewhat skeptical about its ability to augment earnings in the quarters ahead.

Why Neutral?

Huntington's first-quarter 2013 earnings came in at 17 cents per share, beating the Zacks Consensus Estimate by a penny. However, results were stable compared with the prior-year quarter earnings.

Huntington's results reflected growth in net interest income and reduced expenses. Net interest margin ascended 2 basis points year over year to 3.42% as a result of the decline in the cost of subordinated notes and other long-term debt along with reduced total deposit costs.

However, declining revenues due to a drop in the non-interest income was the headwind. Huntington's total revenue on a fully-taxable-equivalent (FTE) basis was $682.3 million, down 3% year over year. Moreover, the revenue figure was below the Zacks Consensus Estimate of $693 million.

According to Huntington's management, though improving trends in the Midwest region is being witnessed, customers are more concerned owing to the uncertainties in the broader economy.

Following first-quarter 2013 results, over the last 60 days, the Zacks Consensus Estimate for 2013 and 2014 remained stable at 67 cents and 69 cents per share, respectively. Hence, Huntington carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some Midwest banking stocks that are currently performing well include Old Second Bancorp Inc. ( OSBC ), First Interstate Bancsystem Inc. ( FIBK ) and Enterprise Financial Services Corp. ( EFSC ). All these companies carry a Zacks Rank #1 (Strong Buy).

ENTERPRISE FINL (EFSC): Free Stock Analysis Report

FIRST INTST MT (FIBK): Free Stock Analysis Report

HUNTINGTON BANC (HBAN): Free Stock Analysis Report

OLD SECOND BCP (OSBC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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