DBRS: Huntington Reports Improved QoQ Earnings Driven by Strong Loan Growth

Summary:
• 2Q14 earnings applicable to common shareholders of $156.7 million, up 11% from 1Q14, and 10% from 2Q13.
• Improved QoQ earnings were driven by strong loan growth, as well as higher fee income.
• DBRS rates Huntington Bancshares Incorporated’s Issuer & Senior debt at BBB (high) with a Stable trend.

Huntington Bancshares Incorporated’s (Huntington or the Company) improved quarter-on-quarter (QoQ) earnings were driven by strong loan growth, higher deposit service charges, and moderately lower expenses. Loan growth was sustained, especially within the Company’s commercial & industrial, and auto loan portfolios. Positively, the pipelines for these portfolios remain robust. Overall, Huntington’s balance sheet fundamentals remain solid, reflecting sound asset quality, and solid capital and funding profiles.

Improved QoQ earnings were driven by a 3.5% increase in total revenues and a 0.3% decrease in non-interest expense. Huntington’s spread income improved by 5.1% linked-quarter, driven by a 3.7% increase in average loans and a one bp widening of net interest margin (NIM) to 3.28%. Spread income also benefited from an increase in securities, as the Company continues to prepare for the Basel III liquidity coverage ratio. Meanwhile, the wider NIM reflected the unexpected pay-off of an acquired commercial real estate loan, which added four bps to the ratio.

Higher QoQ non-interest income (up 0.6%) mostly reflected higher deposit service charges, up from seasonally lower 1Q14 levels, and improved electronic banking fees. Excluding securities gains and losses, fee income would have increased a high 7.8% linked-quarter. Finally, although still elevated due to sustained investments in the franchise, operating expenses were modestly down QoQ.

Huntington’s sound asset quality improved during 2Q14, reflecting lower levels of non-performing assets and net charge-offs.

DBRS rates Huntington Bancshares Incorporated Issuer & Senior debt at BBB (high) with a Stable trend.

Note:
All figures are in U.S. Dollars unless otherwise noted.