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TheStreet Open House

10 Bank Stocks Ready for a 2012 Dividend Boost

Stock quotes in this article: JPM, HBAN, HCBK, NYB, WABC, DCOM, FFIN, FFIC, NBTB, WSBC, INDB, FCBC, FNMA, FMCC, HFBN, FNFG, HBC

8. Huntington Bancshares

Huntington Bancshares (HBAN) of Columbus, Ohio closed at $5.16 Friday, down 24% year-to-date. Based on a quarterly payout of four cents, the shares have a dividend yield of 3.10%.

The company had $55 billion in total assets as of Sept. 30, with roughly 600 branches in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky.

An interesting development during the third quarter for Huntington was the resumption of securitization of auto loans, with the company booking a $15 million gain. SNL Financial reported on Nov 2 that executives of Ally Financial -- the former GMAC and the leading U.S auto financing provider --were concerned about "significant increases in competition."

Huntington CEO Stephen Steinour said in October, following the company's third-quarter earnings announcement, that the bank's Super Prime indirect auto loan portfolio was a "core business" and that the company was being rewarded for staying loyal to auto dealers by not exiting the business at the height of the financial crisis.

The company has recently expanded its auto dealer financing business into Pennsylvania, New England, Wisconsin and Minnesota.

Huntington was also included among TheStreet's 10 Banks Seeing Double-Digit Growth in Business Loans.

Third-quarter net income applicable to common shares was $135.7 million, or 16 cents a share, declining from net income to common shareholders of $138.2 million, or 16 cents a share, in the second quarter, and increasing from $71.5 million, or 10 cents a share, in the third quarter of 2010, when the company was still paying dividends on preferred shares held by the government for assistance received through the Troubled Assets Relief Program, or TARP. Huntington fully repaid TARP in December 2010.

The sequential earnings decline reflected an increase in the provision for loan losses to $43.6 million from $35.8 million in the second quarter, although the provision declined from $119.2 million in the third quarter of 2010.

The net interest margin declined slightly during the third quarter to 3.34%, from 3.40% the previous quarter and 3.45% a year earlier.

The third-quarter ROA was 1.06%, according to SNL.

FBR Capital Markets analyst Paul Miller on Oct. 21 reiterated his neutral rating on Huntington Bancorp, with a price target of $6, saying "the company continues to struggle to grow revenues with the economy still sluggish and an expense base that continues to climb." Miller added that Huntington's aggressive pursuit of deposit growth "has been successful in gaining new customers and will likely lead to new lending relationships," but also said that the company might "have difficulty growing revenue in an environment when fee revenue is being attacked and interest rates are at historic lows."

The shares trade for 8.3 times the consensus 2012 EPS estimate of 61 cents, among analysts polled by FactSet, and just over tangible book value, according to SNL.

Out of 18 analysts covering Huntington, eight rate the shares a buy, nine have neutral ratings, and one analyst recommends selling the shares.

Huntington is clearly a work in progress, but the shares are cheaply priced to forward earnings, and the company is not sitting still.

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