Huntington Bancshares (NASDAQ:HBAN) reported third-quarter results that management said reflected continued commercial lending momentum, growth in fee businesses, completed cost-synergy actions and disciplined capital allocation amid a more competitive lending and deposit environment.
Chairman and CEO Steve Steinour said the operating backdrop remains generally constructive, supported by commercial pipelines and consumer spending, although higher interest rates and elevated energy and other input costs could eventually weigh on growth. He said the bank is maintaining its moderate-to-low risk appetite and has reduced activity in businesses where risk-adjusted returns no longer meet its standards.
“Our C&I growth remains very strong,” Steinour said, citing the national commercial strategy. At the same time, Huntington has scaled back in certain asset classes, including indirect auto lending and residential mortgages, where pricing and returns have become less attractive.
Commercial growth offsets pullbacks in select portfolios
Period-end loans rose 1.1% sequentially, while average loans declined 0.4% from the prior quarter. Chief Financial Officer Zach Wasserman said loan growth was led by commercial and industrial lending, including corporate and specialty banking, asset finance and middle-market banking. Lower commercial real estate, auto and residential mortgage balances partly offset those gains.
Management expects sequential loan growth in the fourth quarter and continues to project approximately 6% organic loan growth for the full year. Steinour and President Brant Standridge said the expected growth is supported by commercial pipelines, expansion in newer markets and the company’s specialized commercial-business verticals.
Standridge said the company’s legacy banking markets generated 6% year-over-year loan growth and 3% deposit growth. In newer geographies such as the Carolinas, organic loan and deposit growth reached 40% and 50%, respectively. Corporate and specialty banking produced $11 billion of year-over-year loan growth and $9 billion in deposit growth, according to management.
On commercial real estate, Steinour said accelerated refinance activity during July and August led some loans to move to Fannie Mae, Freddie Mac and debt funds. He described the shift as part of Huntington’s risk-management strategy rather than a broad deterioration in underwriting standards. Construction commitments fell to about 8% of commercial real estate commitments during the quarter, he said.
Margin expands as deposit-cost increases moderate
Average deposits increased about $500 million, or 0.2%, from the preceding quarter. End-of-period deposit growth approximately matched loan growth, consistent with Huntington’s objective of core-funding its balance sheet.
The overall cost of deposits was 1.90%, up 2 basis points from the second quarter, though Wasserman said the pace of increases moderated significantly. Consumer primary bank relationships rose 4% year over year, business banking primary bank relationships increased 5%, and commercial primary bank relationships rose 7%.
Net interest income totaled approximately $2.1 billion, up $18 million, or 0.9%, sequentially and 37% year over year. Net interest margin increased 4 basis points to 3.25%, helped by higher asset yields, lower average Federal Reserve cash balances and optimization of interest-bearing liabilities. Lower purchase-accounting accretion and a modest hedge drag partially offset those benefits.
Management expects net interest margin to remain approximately flat in the fourth quarter and forecast full-year net interest income growth of about 35%. Eric Wasserstrom, Huntington’s director of investor relations, said the company is assuming a 50% to 60% deposit beta in its outlook, reflecting continued competitive intensity.
Fee growth and expense initiatives support earnings outlook
Value-added fee revenue increased more than 15% year over year on a reported basis, including contributions from the Veritex and Cadence partnerships. Management cited increased treasury-management penetration, payment volumes, merchant-services adoption, wealth relationships and capital-markets engagement.
Standridge said debt and equity capital-markets revenue rose 35% year to date, wealth net flows increased 28%, and treasury-management revenue grew 42% year over year. The company expects fourth-quarter fee revenue of approximately $750 million, subject to normal variability, which would imply full-year fee-income growth of roughly 31%.
Noninterest expense was $1.7 billion, essentially flat sequentially. Huntington completed Cadence expense-synergy actions during the quarter, with the full run-rate benefit expected to begin in the fourth quarter. The bank expects core expenses to remain flat in the fourth quarter compared with the third quarter and expects at least 100 basis points of positive operating leverage for full-year 2026.
Management said it expects about $150 million of incremental Cadence cost synergies as late-2026 actions are annualized. Wasserstrom said those synergies, along with share repurchases and projected core earnings growth, support Huntington’s 2027 earnings-per-share outlook of $1.75 to $1.83.
Capital return continues while credit remains within expectations
Reported common equity tier 1 capital ended the quarter at 10.1%, while adjusted CET1 was 8.9%. Huntington repurchased approximately $460 million of common stock year to date, including $100 million in the third quarter and $50 million early in the fourth quarter.
The company expects to execute approximately $1.8 billion to $1.9 billion in repurchases across this year and next year, while continuing to support organic growth and its dividend. Tangible book value per share was $9.47, and adjusted return on tangible common equity was 16.6% for the quarter. Management continues to target ROTCE of 17% to 18% in 2027.
Net charge-offs were 31 basis points, up 6 basis points sequentially, primarily due to one idiosyncratic commercial credit charge-off. Huntington expects full-year charge-offs near the low end of its 25- to 35-basis-point guidance range. The allowance for credit losses was 1.75% of loans, while the nonperforming asset ratio rose to 90 basis points from 85 basis points.
Chief Credit Officer Brendan Lawlor said credit performance has remained stable and that management’s 2027 outlook does not assume reserve releases. Instead, the company expects reserve levels to grow alongside the loan portfolio.
About Huntington Bancshares (NASDAQ:HBAN)
Huntington Bancshares Incorporated is a regional bank holding company headquartered in Columbus, Ohio. Its principal subsidiary, The Huntington National Bank, provides banking and financial services to consumers, businesses, institutions and government entities.
The company’s offerings include checking and savings accounts, consumer and residential lending, credit cards, auto finance, mortgages, commercial loans, treasury management, investment and wealth management services, insurance, and other financial solutions.
