Yahoo Finance Huntington (HBAN) Q1 Earnings Top Estimates on Revenue Growth
Huntington Bancshares Incorporated HBAN has reported first-quarter 2023 adjusted earnings per share of 38 cents (excluding the after-tax impacts of notable items), surpassing the Zacks Consensus Estimate of 37 cents. The company reported 32 cents in the comparable period last year.
The results have benefited from notable increases in net interest income (NII) and non-interest income. However, a rise in expenses and higher provision from credit losses were headwinds.
The company has reported a net income applicable to common shares of $573 million in the quarter, up 33% year over year.
Revenues Rise, Expenses Escalate
Total revenues (on a fully-taxable equivalent or FTE basis) climbed 17% year over year to $1.93 billion in the first quarter. Also, the top line surpassed the consensus estimate of $1.90 billion.
NII (FTE basis) was $1.4 billion, up 23% from the prior-year quarter. The upside resulted from an increase in the net interest margin, which rose 52 basis points to 3.4%, and higher average earning assets.
Non-interest income moved up 3% year over year to $512 million. The rise mainly stemmed from the higher card and payment processing income, and capital market fees, partially offset by lower service charges on deposit accounts, mortgage banking and leasing revenues.
Non-interest expenses were up 3% year over year to $1.08 billion. This was due to a rise in personnel costs, marketing costs, and deposit and other insurance expenses.
The efficiency ratio was 55.6%, down from the prior-year quarter’s 62.9%. A decline in the ratio indicates a rise in profitability.
As of Mar 31, 2023, average loans and leases at Huntington improved 1% on a sequential basis to $120.4 billion. Average total deposits increased marginally to $146.1 billion.
Credit Quality Deteriorates
Net charge-offs were $57 million or an annualized 0.19% of average total loans in the reported quarter, up from the $19 million or 0.07% recorded in the prior year. The quarter-end allowance for credit losses increased 9% to $2.29 billion. In the first quarter, the company recorded a provision from credit losses of $85 million compared with $25 million in the prior-year quarter.
Nonetheless, total non-performing assets were $578 million as of Mar 31, 2023, down from $708 million in the prior-year quarter.
Capital Ratios Solid
The common equity tier 1 risk-based capital ratio was 9.55% in the quarter compared with 9.22% in the year-ago period. The regulatory Tier 1 risk-based capital ratio was 11.30 %, up from 10.84% in the comparable period in 2022. The tangible common equity to tangible assets ratio in the first quarter was 5.77%, down from 6.28% as of Mar 31, 2022.
Our Viewpoint
Huntington put up a decent performance in the first quarter. The momentum in average earning asset growth and higher rates will drive NII in the upcoming quarters. However, elevated non-interest expenses are likely to keep the bottom line under pressure. Declining mortgage banking income is another woe.
Huntington Bancshares Incorporated Price, Consensus and EPS Surprise
Huntington Bancshares Incorporated price-consensus-eps-surprise-chart | Huntington Bancshares Incorporated Quote
Currently, Huntington carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
U.S. Bancorp’s USB first-quarter 2023 earnings per share (excluding merger and integration-related charges) of $1.16 handily beat the Zacks Consensus Estimate of $1.13 per share. It grew 17.2% from the prior-year quarter.
USB’s results benefited from an increase in NII, supported by higher interest rates. However, a decline in non-interest income (largely on lower mortgage banking income) and higher expenses were the headwinds. Also, USB’s credit quality deteriorated in the reported quarter.
Citizens Financial Group CFG reported first-quarter 2023 earnings per share of $1, missing the Zacks Consensus Estimate of $1.11. Nonetheless, the bottom line rose from 93 cents in the year-ago quarter.
CFG’s results reflect NII growth on an increase in interest-earning assets. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors for CFG.
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