Huntington Bancshares Incorporated (HBAN) in Columbus, Ohio, is a $177 billion regional bank holding company that provides a comprehensive suite of banking, payments, wealth management, and risk management products and services. It operates more than 1,000 branches in 11 states, with certain businesses operating in extended geographies.
The company is making significant progress in its inorganic growth strategies. It recently announced the acquisition of Torana, Inc., a business-to-consumer payments fintech company based in San Francisco, aiming to enhance its digital capabilities. Also, earlier this year, the company announced an agreement to acquire Capstone Partners, one of the largest and most successful investment banking and advisory firms, which aligns with its Capital Markets strategic plan and should help better serve its clients.
Furthermore, the Federal Reserve’s policy switch to fight inflation, beginning with an expected long cycle of interest rate increases, could boost HBAN’s margins. However, Christopher Marinac, director of research at Janney Montgomery Scott, believes that “the impact of rising interest rates is more likely to benefit banks in 2023 than 2022 due to the timing of Federal Reserve policy changes and the actual reset of banks’ loan portfolio and the deployment of excess cash and liquidity.” However, the company’s earnings for the first quarter missed the consensus estimate. And, its EPS has decreased at a 14.4% CAGR over the past three years. HBAN shares have plummeted 12.4% in price year-to-date to close the last trading session at $13.51. The stock has been down 14.2% over the past year.
Here is what could shape HBAN’s performance in the near term:
For its fiscal first quarter, ended March 31, 2022, HBAN’s net interest income increased 17.9% year-over-year to $1.15 billion, while its total noninterest income came in at $499 million, up 26.3% from the same period last year. However, its net income attributable to HBAN decreased 13.5% from its year-ago value to $460 million. The company’s EPS declined 39.6% year-over-year to $0.29, missing the Street’s estimate by 3.3%. Also, its tangible book value per share declined 13.5% year-over-year to $7.47. HBAN’s return on average common equity and return on average assets stood at 10.4% and 1.05%, respectively, versus the prior-year quarter values of 18.7% and 1.76%.
HBAN’s 19.89% trailing-12-month net income margin is 32.3% lower than the 29.38% industry average. And its 7.98% trailing-12-month return on equity compares with the 12.70% industry average, while the company’s 0.69% ROA is 45.2% lower than the 1.26% industry average.
In terms of forward P/E, HBAN is currently trading at 9.69x, which is 6.8% lower than the 10.39x industry average. Also, its 2.81 forward Price/Sales ratio is 2.3% lower than the 2.88 industry average.
However, HBAN’s 4.86x forward non-GAAP PEG is 330% higher than the 1.13x industry average , and its 1.13x forward Price/Book is 2.1% higher than the 1.11x industry average.
POWR Ratings Reflect Uncertainty
HBAN has an overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a grade of C for Value, which is consistent with its mixed valuation.
HBAN has a D grade for Quality, in sync with its lean profit margins.
Of the 42 stocks in the C-rated Midwest Regional Banks group, HBAN is ranked #33.
Beyond what I have stated above, you can also view HBAN’s grades for Sentiment, Growth, Momentum, and Stability here.
View the top-rated stocks in the Midwest Regional Banks group here.
Although the company’s revenues are expected to increase in the coming months, its bottom line prospects look uncertain. Analysts expect HBAN’s EPS to decrease 2.2% per annum over the next five years. While the company is likely to benefit from its recent inorganic moves, it could be wise to wait for the company to improve its profitability position before investing in the stock.
How Does Huntington Bancshares Incorporated (HBAN) Stack Up Against its Peers?
While HBAN has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, Midland States Bancorp, Inc. (MSBI), First Financial Corporation Indiana (THFF), and First Business Financial Services, Inc. (FBIZ), which have a B (Buy) rating.
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HBAN shares fell $0.12 (-0.89%) in premarket trading Tuesday. Year-to-date, HBAN has declined -11.50%, versus a -16.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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