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Huntington Holds Steady, CEO Touts 'Wallet Share' (Update 1)

"We had estimated a year ago that the final rules would cost us 150 basis points, so we were relatively pleased with how it came out," Steinour says. "The biggest impact is on risk-weighted assets, so over time, it will have an effect on the banking industry to adjust to lower risk-weighted assets to minimize the impact of Basel III."

When discussing the types of loans that may be affected by the Fed's capital rules, and what this might mean for business borrowers, Steinour says "there is a change in risk weightings around multiyear lines of credit for commercial borrowers. That may translate to some additional borrowing costs to have those lines available. The banks have to carry capital against those lines."

"Generally the Basel III stuff has been good for the regional banks, and it separated the regionals from the very large global SIFIs [systemically important financial institutions]," he says.

Huntington's shares were up 2% in late morning trading, to $8.38.

In a note to clients following the earnings release, Jefferies analyst Ken Usdin wrote "Expenses were well-controlled and Basel III Tier 1 common is now 90bp higher (we estimate 10.1% in 2Q13) under new rules, but sluggish C&I growth (-0.9% Q-Q) and the softer core fee guide (now stable-to-down vs. flat previously) will likely leave investors somewhat disappointed."

Huntington's provision for loan losses declined to $24.7 million in the second quarter from $29.6 million the previous quarter and $36.5 million a year earlier, directly boosting pre-tax earnings.

Usdin estimated Huntington's Basel III Tier 1 common equity ratio was a solid 10.1% as of June 30.

The analyst rates Huntington Bancshares a "buy," with a price target of $9.00.

Huntington's shares closed at $8.24 Wednesday, returning 31% this year, following a 19% return during 2012. The shares trade for 1.4 times their reported June 30 tangible book value of $5.88, and for 12 times the consensus 2014 EPS estimate of 69 cents. The consensus 2013 EPS estimate is 67 cents.

Based on a quarterly payout of five cents, the shares have a dividend yield of 2.43%. Huntington's board of directors has authorized share buybacks of up to $227 million. The company bought back 10 million shares during the second quarter, at an average price of $7.50.

HBAN Chart HBAN data by YCharts

Interested in more on Huntington Bancshares? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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