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Higher Expenses to Hurt Huntington (HBAN) in Q2 Earnings?
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Huntington Bancshares (HBAN - Free Report) is slated to report second-quarter 2024 results on Jul 19 before the opening bell. The company’s quarterly revenues and earnings are expected to have declined year over year.
In the last reported quarter, the bank recorded a positive earnings surprise of 12%. Results have reflected improvements in average loans and deposits. However, a fall in net interest income (NII) and elevated expenses were headwinds.
Huntington Bancshares Incorporated Price and EPS Surprise
HBAN has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 7.82%.
The Zacks Consensus Estimate for HBAN’s second-quarter earnings of 28 cents per share has been revised marginally downward in the past week, reflecting the bearish sentiments of analysts. The figure indicates a 20% decline from the year-ago reported number.
The consensus estimate for revenues of $1.81 billion suggests a year-over-year drop of 2.1%.
Key Factors & Estimates for Q2
Loans: The company’s overall lending activities are likely to have been moderate in the second quarter. The demand for consumer loans declined, whereas commercial real estate loans experienced softer demand in the quarter under review than in prior quarters.
However, the demand for commercial and industrial loans improved, per the Federal Reserve’s latest data. Given HBAN’s significant exposure to commercial loans, this is likely to have positively impacted average interest-earning assets during second-quarter 2024 to some extent. The Zacks Consensus Estimate for average interest-earning assets of $177.29 billion for the quarter indicates a 2% rise from the prior quarter’s levels.
NII: Though the Fed did not raise rates in the quarter, the policy rate stands at a 23-year high of 5.25-5.5% at present. Such high rates are likely to have some positive impact on the company’s NII.
Despite an inverted yield curve, stabilizing funding costs and decent loan demand are expected to have supported the company’s NII in the quarter to be reported.
The Zacks Consensus Estimate for NII is pegged at $1.31 billion, suggesting a 1.9% rise sequentially.
Non-Interest Income: In the second quarter, mortgage rates decreased marginally, with the rate on a 30-year fixed mortgage declining to 6.7% in June from 6.8% at the start of April. This is likely to have resulted in a slight rise in mortgage demand. Yet, origination volumes (particularly purchase originations) remained lower than in the prior quarter due to home price appreciation.
Supported by lower mortgage rates, there is the likelihood of a modest rise in refinancing activities. With borrowers accepting the fact that interest rates will remain high for a longer period, it is likely to have provided support to HBAN’s mortgage banking income. The Zacks Consensus Estimate for the metric is pegged at $31.5 million, suggesting a marginal increase from the prior quarter’s reported figure.
Global deal-making witnessed a rebound in the second quarter, and the performance of the capital markets business, including issuance activities, improved. Solid financial performance, fading recession risks, buoyant markets, and expected rate cuts this year were the major factors driving a better picture. Thus, the company’s capital market fees are likely to have been positively impacted. The Zacks Consensus Estimate for the same is pegged at $64.6 million, indicating 15.4% growth sequentially.
Wealth and asset management revenues are likely to have gained from higher equity market performance in the quarter. The Zacks Consensus Estimate for wealth and asset management revenues is pegged at $89.6 million, indicating a 1.9% rise from the prior quarter’s tally.
The consensus estimate for customer deposit and loan fees for the second quarter is pegged at $79.9 million, suggesting a rise of 3.8% on a sequential basis. The consensus mark for insurance income of $19.24 million implies a marginal sequential rise.
The consensus mark for total non-interest income is pegged at $493.8 million, indicating a 5.7% sequential rise.
Expenses: Huntington’s higher outside data processing and other services expenses, deposit, and marketing expenses are anticipated to have raised its costs in the second quarter. Though strategic efficiency initiatives are likely to reduce expenses to some extent, long-term investments in key growth initiatives are likely to have kept its expense base higher.
Management expects adjusted non-interest expenses to be higher sequentially in the second quarter, nearly at $1,130 million.
Asset Quality: HBAN is likely to have set aside a substantial amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of an economic slowdown.
The Zacks Consensus Estimate for total non-performing assets of $750.2 million suggests a 1.6% increase from the figure reported in the prior quarter.
What Our Quantitative Model Reveals
Our proven model does not predict an earnings beat for Huntington this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Earnings ESP: The Earnings ESP for Huntington is -1.22%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently has a Zacks Rank #5 (Strong Sell).
Stocks That Warrant a Look
Here are some finance stocks that you may want to consider, as our model shows that have the right combination of elements to post an earnings beat this time around.
In the past 60 days, the Zacks Consensus Estimate for NTRS' quarterly earnings has moved upward by 1.2%
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.22% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2014 earnings on Jul 18.
MTB’s quarterly earnings estimates have moved marginally downward in the past seven days.
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Higher Expenses to Hurt Huntington (HBAN) in Q2 Earnings?
Huntington Bancshares (HBAN - Free Report) is slated to report second-quarter 2024 results on Jul 19 before the opening bell. The company’s quarterly revenues and earnings are expected to have declined year over year.
In the last reported quarter, the bank recorded a positive earnings surprise of 12%. Results have reflected improvements in average loans and deposits. However, a fall in net interest income (NII) and elevated expenses were headwinds.
Huntington Bancshares Incorporated Price and EPS Surprise
Huntington Bancshares Incorporated price-eps-surprise | Huntington Bancshares Incorporated Quote
HBAN has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 7.82%.
The Zacks Consensus Estimate for HBAN’s second-quarter earnings of 28 cents per share has been revised marginally downward in the past week, reflecting the bearish sentiments of analysts. The figure indicates a 20% decline from the year-ago reported number.
The consensus estimate for revenues of $1.81 billion suggests a year-over-year drop of 2.1%.
Key Factors & Estimates for Q2
Loans: The company’s overall lending activities are likely to have been moderate in the second quarter. The demand for consumer loans declined, whereas commercial real estate loans experienced softer demand in the quarter under review than in prior quarters.
However, the demand for commercial and industrial loans improved, per the Federal Reserve’s latest data. Given HBAN’s significant exposure to commercial loans, this is likely to have positively impacted average interest-earning assets during second-quarter 2024 to some extent. The Zacks Consensus Estimate for average interest-earning assets of $177.29 billion for the quarter indicates a 2% rise from the prior quarter’s levels.
NII: Though the Fed did not raise rates in the quarter, the policy rate stands at a 23-year high of 5.25-5.5% at present. Such high rates are likely to have some positive impact on the company’s NII.
Despite an inverted yield curve, stabilizing funding costs and decent loan demand are expected to have supported the company’s NII in the quarter to be reported.
The Zacks Consensus Estimate for NII is pegged at $1.31 billion, suggesting a 1.9% rise sequentially.
Non-Interest Income: In the second quarter, mortgage rates decreased marginally, with the rate on a 30-year fixed mortgage declining to 6.7% in June from 6.8% at the start of April. This is likely to have resulted in a slight rise in mortgage demand. Yet, origination volumes (particularly purchase originations) remained lower than in the prior quarter due to home price appreciation.
Supported by lower mortgage rates, there is the likelihood of a modest rise in refinancing activities. With borrowers accepting the fact that interest rates will remain high for a longer period, it is likely to have provided support to HBAN’s mortgage banking income. The Zacks Consensus Estimate for the metric is pegged at $31.5 million, suggesting a marginal increase from the prior quarter’s reported figure.
Global deal-making witnessed a rebound in the second quarter, and the performance of the capital markets business, including issuance activities, improved. Solid financial performance, fading recession risks, buoyant markets, and expected rate cuts this year were the major factors driving a better picture. Thus, the company’s capital market fees are likely to have been positively impacted. The Zacks Consensus Estimate for the same is pegged at $64.6 million, indicating 15.4% growth sequentially.
Wealth and asset management revenues are likely to have gained from higher equity market performance in the quarter. The Zacks Consensus Estimate for wealth and asset management revenues is pegged at $89.6 million, indicating a 1.9% rise from the prior quarter’s tally.
The consensus estimate for customer deposit and loan fees for the second quarter is pegged at $79.9 million, suggesting a rise of 3.8% on a sequential basis. The consensus mark for insurance income of $19.24 million implies a marginal sequential rise.
The consensus mark for total non-interest income is pegged at $493.8 million, indicating a 5.7% sequential rise.
Expenses: Huntington’s higher outside data processing and other services expenses, deposit, and marketing expenses are anticipated to have raised its costs in the second quarter. Though strategic efficiency initiatives are likely to reduce expenses to some extent, long-term investments in key growth initiatives are likely to have kept its expense base higher.
Management expects adjusted non-interest expenses to be higher sequentially in the second quarter, nearly at $1,130 million.
Asset Quality: HBAN is likely to have set aside a substantial amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of an economic slowdown.
The Zacks Consensus Estimate for total non-performing assets of $750.2 million suggests a 1.6% increase from the figure reported in the prior quarter.
What Our Quantitative Model Reveals
Our proven model does not predict an earnings beat for Huntington this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Earnings ESP: The Earnings ESP for Huntington is -1.22%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently has a Zacks Rank #5 (Strong Sell).
Stocks That Warrant a Look
Here are some finance stocks that you may want to consider, as our model shows that have the right combination of elements to post an earnings beat this time around.
Northern Trust Corporation (NTRS - Free Report) has an Earnings ESP of +1.56% and carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2024 results on Jul 17. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for NTRS' quarterly earnings has moved upward by 1.2%
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.22% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2014 earnings on Jul 18.
MTB’s quarterly earnings estimates have moved marginally downward in the past seven days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.