DBRS: Huntington’s Lower QoQ Earnings Reflect the Non-recurrence of a 3Q13 Pension Curtailment Gain

Summary:

• 4Q13 earnings to common shareholders of $149.9 million down 12.1% from 3Q13, due to the non-recurrence of a 3Q13 one-time pension curtailment gain
• Credit continued to improve, resulting in continued reserve releases
• DBRS rates Huntington Bancshares Incorporated’s Issuer & Senior debt at BBB with a Positive trend

DBRS, Inc. (DBRS) views Huntington Bancshares Incorporated’s (Huntington or the Company) 4Q13 earnings as sound, despite continued narrowing of its net interest margin and pressured mortgage banking income. DBRS notes that the Company’s broad business line diversity helps to offset these headwinds.

Overall, lower 4Q13 earnings, on a QoQ basis, mostly reflected the non-recurrence of the Company’s 3Q13 $34 million one-time non-cash gain related to pension curtailment. Positively, asset quality continued to stabilize, allowing for reserve releases, which supported earnings. DBRS views Huntington’s resilient core earnings, relatively sound asset quality and solid capital as supportive of its rating level.

Revenues were relatively stable QoQ with average loan growth offsetting margin compression and lower fee income. Finally, expenses, excluding repositioning charges and the aforementioned pension curtailment gain, were well managed QoQ.

Huntington’s asset quality continued to stabilize, reflecting lower sequential net charge-offs and non-performing assets, leading to sustained loan loss reserve releases. Despite the releases, DBRS views the Company’s loan loss reserves as adequate at 1.50% of total loans.

Huntington’s funding and capital profiles remain solid. A sizable core deposit base fully funds loans. Meanwhile, the Company’s capital position provides sound loss absorption capacity, as well as opportunity for growth. Generally, capital metrics were slightly down QoQ.

DBRS rates Huntington Bancshares Incorporated Issuer & Senior debt at BBB with a Positive trend.

Notes:
All figures are in U.S. dollars unless otherwise noted.

[Amended on December 23th, 2014 to remove unnecessary disclosures.]