01—Abstract
Summary
Summary of the 8-K filed June 10, 2024. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated furnished, under Item 7.01 of Form 8-K, slides for a presentation by Chief Financial Officer Zach Wasserman at the 2024 Morgan Stanley US Financials, Payments, and CRE Conference on June 10, 2024.
The slides state that the company is operating from a position of strength, with a 10.2%a Common Equity Tier 1 ratio as of 1Q24 (12.0% adjusted for the allowance for credit losses and 8.5% adjusted for AOCI), and that it is driving sustained organic deposit and loan growth. Average loan growth of more than 5% year over year is cited as a goal, and the company says it expects sequential loan growth in 2024. The presentation revises the 2024 outlook as of June 10, 2024, compared with April 19, 2024.
Average loans are now guided to rise 3%b to 4% (previously 3% to 5%), and average deposits to rise 3% to 4% (previously 2% to 4%). Net interest income is now guided to decline 1% to 4% (previously down 2% to up 2%), with sequential increases expected from the first-quarter level, accelerating into the second half of 2024 and 2025. Adjusted noninterest income is still guided to rise 5% to 7%, adjusted noninterest expense to rise about 4.5%, and full-year 2024 net charge-offs are expected at 25 to 35 basis points.
Management also highlighted strategic initiatives, including expansion into the Carolinas and Texas, new commercial specialty verticals, deposit-focused specialty banking for HOA, title, escrow and mortgage servicing customers with a medium-term goal of $5Bc+ in deposits for each, and a rebuilt merchant acquiring model with a five-year goal of more than 2x customer penetration and more than 4x revenue opportunity. The slides describe credit as tracking in line with expectations, with consumer loans at 44% and commercial loans at 56% of total loans and CRE at 10% of total loans.
02—Key points
Key Highlights
- CFO Zach Wasserman presented at the 2024 Morgan Stanley US Financials, Payments, and CRE Conference on June 10, 2024; the slides are furnished, not filed, under Item 7.01.
- Capital and liquidity: CET1 ratio of 10.2% as of 1Q24, 12.0% adjusted for ACL and 8.5% adjusted for AOCI; liquidity equal to 205% of uninsured deposits.
- Updated 2024 guidance as of June 10, 2024: average loans up 3% to 4% (from 3% to 5%), average deposits up 3% to 4% (from 2% to 4%), and net interest income down 1% to 4% (from down 2% to up 2%).
- Noninterest income (ex-notable items, MTM on pay-fixed swaptions and CRT) guided up 5% to 7%; noninterest expense (ex-notable items) guided up about 4.5%; effective tax rate about 19%.
- Full-year 2024 net charge-offs guided to 25 to 35 basis points, in the lower half of the 25 to 45 basis point through-the-cycle target range.
- Growth initiatives include expanded merchant acquiring with a five-year goal of more than 2x customer penetration and more than 4x revenue opportunity, the Torana (Huntington ChoicePay) acquisition, and expansion into the Carolinas and Texas.
- Fee revenue mix for 1Q24: payments and cash management 31%, wealth and asset management 19%, capital markets and advisory 12%, all other noninterest income 38%.
03—Questions
Frequently Asked Questions
What changed in Huntington's 2024 outlook?
As of June 10, 2024, the company guided average loans up 3% to 4% (previously 3% to 5%), average deposits up 3% to 4% (previously 2% to 4%), and net interest income down 1% to 4% (previously down 2% to up 2%) versus the FY23 baselines. Other guidance items, including adjusted noninterest income up 5% to 7%, adjusted noninterest expense up about 4.5%, and net charge-offs of 25 to 35 basis points, were unchanged.
How strong is Huntington's capital and liquidity position?
The slides state a CET1 ratio of 10.2% as of 1Q24, or 12.0% when the allowance for credit losses is added back and 8.5% when AOCI is adjusted. Liquidity, defined as cash, available Federal Reserve and FHLB borrowing capacity, equals 205% of uninsured deposits. The company describes its position as one of strength.
What is the company's credit profile?
The presentation says credit performance is tracking in line with expectations. Consumer loans are 44% and commercial loans 56% of total loans, with over 95% of the consumer book secured. CRE is 10% of total loans, including multifamily at 3.8%, industrial at 1.6% and office at 1.4%, and the company cites the highest-quartile CRE reserve of 4.6%.
What growth drivers does management emphasize?
Management cites commercial portfolios, including business banking, middle market and specialty verticals, as the majority of loan growth, partly offset by CRE paydowns. Consumer growth is driven by auto, RV and marine, and residential mortgage. The company also plans to add one to two specialty verticals annually, expand deposit-focused specialty banking, and grow fee revenue in payments, card and treasury management.
What is the company's payments strategy?
The company is moving merchant acquiring from an outsourced model to an in-house model, integrated with its banking products and digital experience. Its five-year goals are more than 2x customer penetration and more than 4x revenue opportunity compared with the prior outsourced model. Payments and cash management represent 31% of 1Q24 fee revenue, and the company expects sequential revenue increases each quarter of 2024 and into 2025.
04—Continue