Huntington Beats as Revenue Rises (Update 1)

• Fourth-quarter EPS of 19 cents "essentially unchanged" from previous quarter, as revenue gains are offset by a higher effective tax rate and a temporary expense increase for regulatory compliance.
• EPS beats analyst consensus of a 19-cent profit.
• Net interest margin expands.
• Mortgage revenue rises 38% sequentially.

Updated with midday market action and comments from Jefferies analyst Ken Usdin.

NEW YORK (TheStreet) -- Huntington Bancshares (HBAN) on Thursday announced fourth-quarter earnings that were "essentially unchanged" from the third quarter, but underlying revenue trends were quite positive.

The Columbus, Ohio, lender reported fourth-quarter earnings of $159.3 million, or 19 cents a share, beating the consensus EPS estimate of 17 cents, among analysts polled by Thomson Reuters. In comparison, the company earned $167.8 million, or 19 cents a share, in the third quarter, and $119.2 million, or 14 cents a share, in the fourth quarter of 2011.

Huntington CEO Stephen Steinour

Huntington earned $641 million, or 71 cents a share, during 2012, increasing from $542.6 million, or 59 cents a share, during 2011. CEO Stephen Steinour said "this year's results clearly showed the continued benefit of our investments and our differentiated strategy," added Steinour. "These investments, coupled with adding over 133,000 consumer households, a 12% increase, and 12,700 commercial relationships, a 9% increase, has allowed Huntington to grow revenue and pretax income by more than $200 million and $117 million, respectively."

Huntington's shares were up 4% in midday trading, to $6.96, while the KBW Bank Index (I:BKX) was up slightly to 53.60, with all 24 index components showing gains, except for five, including Bank of America (BAC), which was down 4% to $11.33, and Citigroup (C), which was down 3% to $41.25.

Bank of America reported a fourth-quarter profit of $700 million or $.03 a share, beating the consensus EPS estimate by a penny, after the company pre-announced a large mortgage putback settlement with Fannie Mae (FNMA) and a major contribution to the $8.5 billion foreclosure settlement between federal regulators and the nation's largest loan servicers.

Citigroup reported fourth-quarter earnings of $1.2 billion, or 38 cents a share. Excluding credit valuation and debit valuation adjustments, Citi earned $2.2 billion or 69 cents a share, missing the consensus estimate of 96 cents. Citigroup's earnings were lowered by charges related to its restructuring announced in the fourth quarter, as well as a declining release of loan loss reserves.

Huntington's fourth-quarter net interest income totaled $434.1 million, increasing from $430.3 million the previous quarter, and $415.0 million a year earlier. The net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- expanded to 3.45% in the fourth quarter, from 3.38% in the third quarter, and also in the fourth quarter of 2011.

The year-over-year increase in net interest income reflected "the positive impact of a 29 basis point decline in total deposit costs that were partially offset by a 24 basis point decline in the yield on earnings assets and a 2 basis point decrease related to non-deposit funding and other items," the company said. Huntington's average noninterest bearing deposits grew by $3.5 billion, or 41%, year-over-year to $12.6 billion as of Dec. 31. Noninterest deposits grew by 6%, or $0.8 billion,

Meanwhile, average total loans grew by 2% year-over-year, to $40.4 billion as of Dec. 31, with average [non-real estate] commercial and industrial loans growing by 16% to $16.5 billion. C&I loans grew by 1% during the third quarter. When discussing the fourth-quarter slowdown in commercial loan volume, Steinour lays the blame in Washington: "There is a level of uncertainty that is thwarting business investment. There is a deferral in business investment that I think is going to continue in the first quarter," as the discussion has shifted from the fiscal cliff to the federal debt ceiling. Steinour says that the United States needs "a plan so that we are not going to relook at things every two months."

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