Huntington Bancshares Incorporated Reports 2023 Fourth-Quarter Earnings
- Sustained growth in deposits and loans
- Expansion of common equity tier 1 capital
- Successful execution of key strategic initiatives in 2023
- Decrease in net income for the 2023 fourth quarter
- Reduction in net interest income and noninterest income
The reported decrease in earnings per share (EPS) from both the prior quarter and year-ago quarter reflects a contraction in profitability that could concern investors. The decline was partly attributed to a special FDIC assessment and the mark-to-market of hedging programs. These results indicate a need for careful examination of the bank's risk management strategies and the impact of external assessments on its financial performance.
Moreover, the decline in net interest income and noninterest income suggests margin compression, possibly due to a challenging interest rate environment or competitive pressures. This trend could signal a need for the bank to explore alternative revenue streams or cost management strategies to maintain profitability.
On the positive side, the growth in deposits and loans demonstrates the bank's ability to attract and retain customers, which is a fundamental driver of future revenue. The increase in the Common Equity Tier 1 (CET1) capital ratio and the tangible common equity (TCE) ratio indicates a strengthening of the bank's capital position, which enhances its resilience against potential financial shocks and may positively influence investor confidence.
The expansion in Huntington's geographical footprint into the Carolinas and the addition of specialty banking teams could provide new opportunities for market penetration and revenue diversification. This strategic move may be analyzed in the context of the bank's overall growth strategy and the competitive landscape of the regions entered.
Furthermore, the bank's focus on organic growth and customer relationship deepening could be a response to the evolving customer expectations in the banking sector. In the current digital age, customer experience and personalized banking services are increasingly important for customer retention and acquisition. This focus may drive long-term loyalty and sustainable growth.
The completion of a synthetic Credit Risk Transfer (CRT) transaction related to a portfolio of auto loans represents a proactive approach to capital optimization and risk management. By reducing risk-weighted assets, the bank effectively lowers its potential exposure to credit losses, which could be a strategic move in anticipation of an uncertain economic outlook. The impact of such transactions on the bank's risk profile and regulatory capital requirements would be a key area of interest for stakeholders.
The reported net charge-off rate and nonperforming asset ratio provide insights into the bank's asset quality. These metrics are crucial indicators of the bank's credit risk and could influence investor perception of the bank's creditworthiness and risk management capabilities.
Q4 Results Highlighted by Sustained Deposit and Loan Growth, Capital Expansion, and Strong Credit Quality
2023 Fourth-Quarter Highlights:
- Earnings per common share (EPS) for the quarter were
$0.15 $0.20 $0.27 $0.27 $74 million $0.04 - Net interest income decreased
$52 million 4% , from the prior quarter, and decreased$146 million 10% , from the year-ago quarter. - Noninterest income decreased
$104 million 20% , from the prior quarter, to$405 million $74 million $33 million $3 million - Cash and cash equivalents and available contingent borrowing capacity totaled
$93 billion 206% of uninsured deposits. - Average total deposits increased
$1.5 billion 1% , from the prior quarter and$4.0 billion 3% , from the year-ago quarter.- Ending total deposits increased
$2 2% , from the prior quarter and$3 2% , from the year-ago quarter. - Ending core deposits increased
$1 1% , from the prior quarter reflecting continued momentum in consumer deposit gathering and ongoing focus on acquiring and deepening primary bank relationships.
- Ending total deposits increased
- Average total loans and leases increased
$445 million $121.2 billion $2.3 billion 2% , from the year-ago quarter.- Average total consumer loans increased
$320 million $125 million
- Average total consumer loans increased
- Net charge-offs of
0.31% of average total loans and leases for the quarter. - Nonperforming asset ratio of
0.58% . - Allowance for credit losses (ACL) of
$2.4 billion 1.97% , of total loans and leases at quarter end. - Common Equity Tier 1 (CET1) risk-based capital ratio increased 15 basis points to
10.25% , continuing the trend of capital expansion. Adjusted Common Equity Tier 1, including the effect of AOCI, was8.58% , an increase of 58 basis points from the prior quarter. - Tangible common equity (TCE) ratio increased 44 basis points from the prior quarter to
6.14% and increased 59 basis points from a year ago. - As previously announced, Huntington completed a synthetic Credit Risk Transfer ("CRT") transaction during the fourth quarter related to an approximately
$3 billion $2.4 billion 100% to20% on the selected pool of assets.
Return on average assets was
CEO Commentary:
"We are pleased to deliver fourth quarter results highlighted by the continuation of our organic growth efforts with sustained deposit and loan growth as well as the further expansion of common equity tier 1 capital," said Steve Steinour, chairman, president, and CEO. "We are entering the new year from a position of strength with robust liquidity and capital, which allows us to remain focused on executing our growth strategy and serving our customers. We are maintaining our disciplined approach to managing credit quality, consistent with our aggregate moderate-to-low risk appetite, and believe Huntington is well-positioned as we operate through this dynamic environment.
"2023 was marked by the successful execution of key strategic initiatives, as Huntington outperformed during a dynamic environment for the banking sector. The company delivered sustained deposit growth over the course of the year, bolstered capabilities across our payments and other fee revenue areas, and completed the re-alignment of business segments to enhance our focus on the customer and drive efficiencies. Additionally, we bolstered our specialty banking expertise through the addition of new teams and expanded our commercial and regional bank into the Carolinas.
"While the macro outlook continues to play out, we believe the operating environment today is generally more constructive compared to last quarter. Customers are generally well positioned and are continuing to invest in their businesses.
"As a result, we are seeing attractive growth opportunities as we move into 2024, and are positioned to accelerate our loan growth forecast given these dynamics. We are leveraging our leading brand and trust metrics, to build on our growth momentum. We intend to capitalize on our position of strength and to further acquire and deepen customer relationships. These efforts will result in continued growth of revenue and profitability over the course of the year and beyond."
The fourth quarter 2023 earnings materials, including the detailed earnings press release, quarterly financial supplement, and conference call slide presentation, are available on the Investor Relations section of Huntington's website, http://huntington.com/ In addition, the financial results will be furnished on a Form 8-K that will be available on the Securities and Exchange Commission website at www.sec.gov.
Conference Call / Webcast Information
Huntington's senior management will host an earnings conference call on January 19, 2024, at 9:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast at the Investor Relations section of Huntington's website, www.huntington.com, or through a dial-in telephone number at (877) 407-8029; Conference ID #13743211. Slides will be available in the Investor Relations section of Huntington's website about an hour prior to the call. A replay of the webcast will be archived in the Investor Relations section of Huntington's website. A telephone replay will be available approximately two hours after the completion of the call through January 27, 2024 at (877) 660-6853 or (201) 612-7415; conference ID #13743211.
Please see the 2023 Fourth Quarter Quarterly Financial Supplement for additional detailed financial performance metrics. This document can be found on the Investor Relations section of Huntington's website, http://www.huntington.com.
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