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Huntington (HBAN) Beats on Q4 Earnings; Revenue Up Y/Y
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Huntington Bancshares Incorporated (HBAN - Free Report) reported a positive earnings surprise of 9.1% in fourth-quarter 2016. Earnings per share of 24 cents outpaced the Zacks Consensus Estimate by 2 cents. Moreover, the figure was higher than the prior-year quarter adjusted earnings of 22 cents. The reported earnings figure excludes FirstMerit acquisition-related expenses of 6 cents per share.
Share of Huntington Bancshares gained around 2% in the beginning of the trading session today, reflecting investors’ optimism. However, the price reaction during full-trading session will give a better idea.
Huntington Bancshares’ revenues displayed growth. The quarter witnessed continual growth in both loan and deposit balances. Notably, the reported results highlight the benefit of the FirstMerit acquisition. However, elevated expenses and higher provision for credit losses were the primary headwinds.
Net income jumped nearly 19.1% year over year to $212 million during the quarter.
For full-year 2016, net income was $685 million or 67 cents per share compared with $693 million or 81 cents per share in the prior year. Including FirstMerit acquisition-related expenses of 20 cents, earnings came in at 87 cents per share, in line with the Zacks Consensus Estimate.
For full-year 2016, the company reported revenues of $3.6 billion on a fully taxable-equivalent (FTE) basis, up 18% year over year. Moreover, the figure outpaced the Zacks Consensus Estimate of $3.5 billion.
Huntington Bancshares’ total revenue on a fully taxable-equivalent (FTE) basis was $1.08 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.05 billion. Moreover, total revenue was up 39% year over year.
Net interest income (NII) was $748 million on a FTE basis, up 48% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 16 basis points (bps) in net interest margin (NIM) to 3.25%.
Non-interest income climbed 23% year over year to $334 million. The rise was due to growth in almost all components of income.Excluding the impact of certain non-recurring items, non-interest income was $335 million, up 25% year over year.
Non-interest expense surged 45% year over year to $723 million. The increase was due to rise in all components of expenses. Excluding the impact of certain non-recurring items, non-interest expense increased 29% year over year.
As of Dec 31, 2016, average loans and leases at Huntington jumped nearly 33.3% year over year to $66.4 billion. Also, average total deposits surged 39% year over year to $76.9 billion.
Credit Quality: A Mixed Bag
Net charge-offs were $44 million or an annualized 0.26% of average total loans in the reported quarter, up from $22 million or an annualized 0.18% in the year-ago quarter.
Moreover, provision for credit losses more than doubledon a year-over year basis to $75 million. In addition, total non-performing assets totaled $481 million as of Dec 31, 2016, up from $399 million as of Dec 31, 2015.
However, the quarter-end allowance for credit losses, as a percentage of total loans and leases, declined to 1.10% from 1.33% in the prior-year quarter.
Capital Ratios Declined
Huntington Bancshares came under the Basel III capital rules, beginning first-quarter 2015.
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.53% and 10.89%, respectively, as compared with 9.79% and 10.53% in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.14%, down from 7.82% as of Dec 31, 2015.
Share Repurchase
As the company intended to give up its remaining $166 million share repurchase program under the 2015 CCAR capital plan, owing to the proposed FirstMerit acquisition deal, it did not repurchase any common share during 2016.
Outlook for 2017
Including the synergies of FirstMerit acquisition, total revenue for full-year 2017 is expected to be over 20%.Management projects to implement all FirstMerit-related cost savings by third-quarter 2017.
Average balance sheet growth is estimated over 20%, driven mainly by the FirstMerit acquisition. On a period-end basis, loan growth is anticipated in the range of 4–6%.
Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current macroeconomic conditions, commodities and currency market volatility, along with the current low level of problem assets and credit costs.
Management anticipates NCOs to remain below the long-term normalized range of 35–55 basis points, while provision expense is expected to continue to normalize.
Excluding certain items, the effective tax rate for 2017 is anticipated in the range of 24–27%.
Our Viewpoint
Huntington reported an impressive quarter. The company has a solid franchise in the Midwest and is focused on capitalizing on growth opportunities. Further, the company exhibits consistent efforts in increasing loan and deposit balances, aiding revenue growth. Additionally, we remain optimistic about the company’s several strategic actions, including acquisitions and consolidation of branches.
However, escalating costs and a stringent regulatory scenario pose challenges to the company’s financials.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Bank of America Corporation (BAC - Free Report) reported fourth-quarter 2016 earnings. Rise in trading revenue as well as mortgage banking fees led to earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Further, the figure was 48% higher than the year-ago quarter number.
Driven by interest income, Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2016 earnings recorded a positive surprise of about 3%. Adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, it compared favorably with the prior-year quarter’s earnings of $1.00 per share. Including net hedge ineffectiveness accounting impact of 7 cents, earnings came in at 96 cents per share.
Comerica Inc. (CMA - Free Report) delivered a positive earnings surprise of 4.2% in fourth-quarter 2016. Adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. The adjusted figure excludes a restructuring charge of 7 cents per share. Also, earnings increased 43.8% year over year.
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Huntington (HBAN) Beats on Q4 Earnings; Revenue Up Y/Y
Huntington Bancshares Incorporated (HBAN - Free Report) reported a positive earnings surprise of 9.1% in fourth-quarter 2016. Earnings per share of 24 cents outpaced the Zacks Consensus Estimate by 2 cents. Moreover, the figure was higher than the prior-year quarter adjusted earnings of 22 cents. The reported earnings figure excludes FirstMerit acquisition-related expenses of 6 cents per share.
Share of Huntington Bancshares gained around 2% in the beginning of the trading session today, reflecting investors’ optimism. However, the price reaction during full-trading session will give a better idea.
Huntington Bancshares’ revenues displayed growth. The quarter witnessed continual growth in both loan and deposit balances. Notably, the reported results highlight the benefit of the FirstMerit acquisition. However, elevated expenses and higher provision for credit losses were the primary headwinds.
Net income jumped nearly 19.1% year over year to $212 million during the quarter.
For full-year 2016, net income was $685 million or 67 cents per share compared with $693 million or 81 cents per share in the prior year. Including FirstMerit acquisition-related expenses of 20 cents, earnings came in at 87 cents per share, in line with the Zacks Consensus Estimate.
Revenues, Loans & Deposits Rise, Costs Increase
For full-year 2016, the company reported revenues of $3.6 billion on a fully taxable-equivalent (FTE) basis, up 18% year over year. Moreover, the figure outpaced the Zacks Consensus Estimate of $3.5 billion.
Huntington Bancshares’ total revenue on a fully taxable-equivalent (FTE) basis was $1.08 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.05 billion. Moreover, total revenue was up 39% year over year.
Net interest income (NII) was $748 million on a FTE basis, up 48% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 16 basis points (bps) in net interest margin (NIM) to 3.25%.
Non-interest income climbed 23% year over year to $334 million. The rise was due to growth in almost all components of income.Excluding the impact of certain non-recurring items, non-interest income was $335 million, up 25% year over year.
Non-interest expense surged 45% year over year to $723 million. The increase was due to rise in all components of expenses. Excluding the impact of certain non-recurring items, non-interest expense increased 29% year over year.
As of Dec 31, 2016, average loans and leases at Huntington jumped nearly 33.3% year over year to $66.4 billion. Also, average total deposits surged 39% year over year to $76.9 billion.
Credit Quality: A Mixed Bag
Net charge-offs were $44 million or an annualized 0.26% of average total loans in the reported quarter, up from $22 million or an annualized 0.18% in the year-ago quarter.
Moreover, provision for credit losses more than doubledon a year-over year basis to $75 million. In addition, total non-performing assets totaled $481 million as of Dec 31, 2016, up from $399 million as of Dec 31, 2015.
However, the quarter-end allowance for credit losses, as a percentage of total loans and leases, declined to 1.10% from 1.33% in the prior-year quarter.
Capital Ratios Declined
Huntington Bancshares came under the Basel III capital rules, beginning first-quarter 2015.
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.53% and 10.89%, respectively, as compared with 9.79% and 10.53% in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.14%, down from 7.82% as of Dec 31, 2015.
Share Repurchase
As the company intended to give up its remaining $166 million share repurchase program under the 2015 CCAR capital plan, owing to the proposed FirstMerit acquisition deal, it did not repurchase any common share during 2016.
Outlook for 2017
Including the synergies of FirstMerit acquisition, total revenue for full-year 2017 is expected to be over 20%.Management projects to implement all FirstMerit-related cost savings by third-quarter 2017.
Average balance sheet growth is estimated over 20%, driven mainly by the FirstMerit acquisition. On a period-end basis, loan growth is anticipated in the range of 4–6%.
Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current macroeconomic conditions, commodities and currency market volatility, along with the current low level of problem assets and credit costs.
Management anticipates NCOs to remain below the long-term normalized range of 35–55 basis points, while provision expense is expected to continue to normalize.
Excluding certain items, the effective tax rate for 2017 is anticipated in the range of 24–27%.
Our Viewpoint
Huntington reported an impressive quarter. The company has a solid franchise in the Midwest and is focused on capitalizing on growth opportunities. Further, the company exhibits consistent efforts in increasing loan and deposit balances, aiding revenue growth. Additionally, we remain optimistic about the company’s several strategic actions, including acquisitions and consolidation of branches.
However, escalating costs and a stringent regulatory scenario pose challenges to the company’s financials.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise | Huntington Bancshares Incorporated Quote
Currently, Huntington carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other Banks
Bank of America Corporation (BAC - Free Report) reported fourth-quarter 2016 earnings. Rise in trading revenue as well as mortgage banking fees led to earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Further, the figure was 48% higher than the year-ago quarter number.
Driven by interest income, Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2016 earnings recorded a positive surprise of about 3%. Adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, it compared favorably with the prior-year quarter’s earnings of $1.00 per share. Including net hedge ineffectiveness accounting impact of 7 cents, earnings came in at 96 cents per share.
Comerica Inc. (CMA - Free Report) delivered a positive earnings surprise of 4.2% in fourth-quarter 2016. Adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. The adjusted figure excludes a restructuring charge of 7 cents per share. Also, earnings increased 43.8% year over year.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>