Huntington Bancshares (HBAN)

Q4 2010 Earnings Call

January 20, 2011 10:00 am ET

Executives

Daniel Neumeyer - Chief Credit Officer and Senior Executive Vice President

Stephen Steinour - Chairman of the Board, Chief Executive Officer, President, Member of Executive Committee, Chairman of The Huntington National Bank, Chief Executive Officer of The Huntington National Bank and President of The Huntington National Bank

Donald Kimble - Chief Financial Officer, Senior Executive Vice President and Treasurer

Jay Gould - Senior Vice President and Director of Investor Relations

Analysts

David Rochester - Crédit Suisse AG

Anthony Davis - Stifel, Nicolaus & Co., Inc.

Paul Miller - FBR Capital Markets & Co.

Kenneth Usdin - Jefferies & Company, Inc.

Erika Penala - Merrill Lynch

Brian Foran - Goldman Sachs

Ken Zerbe

Presentation

Operator

Good morning. My name is Simon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Huntington Bancshares Fourth Quarter Earnings Conference Call. [Operator Instructions] Mr. Jay Gould, you may begin your conference.

Jay Gould

Thank you, Simon, and welcome, everyone. I'm Jay Gould, Director of Investor Relations for Huntington. Copies of the slides we will be reviewing can be found on our website huntington.com, and this call is being recorded and will be available as a rebroadcast starting about an hour from close. Please call the Investor Relations department at (614) 480-5676 for more information on how to access these recordings or playback or should you have difficulty getting a copy of the slides.

Slides 2, 3 or 4 note several aspects of the basis of today's presentation, and I encourage you to read these but let me point out one key disclosure. This presentation contains both GAAP and non-GAAP financial measures where we believe it's helpful to understanding Huntington's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure as well as the reconciliation to the comparable GAAP financial measure can be found in the slide presentation and its appendix, and the press release and the quarterly financial review supplement to today's earnings release or in the related 8-K filed earlier today, all of which you can find on our website.

Turning to Slide 5. Today's discussion, including the Q&A period, may contain forward-looking statements. Such statements are based on information and assumptions available at this time and are subject to changes and risks and uncertainties, which may cause actual results to differ materially. Huntington assumes no obligation to update such statements. For a complete discussion of risks and uncertainties, please refer to this slide and materials filed with the SEC including our most recent Form 10-K, 10-Q and 8-K filings.

Now turning to today's presentation. As noted on Slide 6, participating today are Steve Steinour, Chairman, President, Chief Executive Officer; Don Kimble, Senior Executive Vice President and Chief Financial Officer; and Dan Neumeyer, Senior Executive Vice President and Chief Credit Officer; also present is Todd Beekman, Senior Vice President and Assistant Director of Investor Relations. Let's get started by turning to Slide 7. Steve?

Stephen Steinour

Welcome, everyone. I'll begin with a review of the fourth quarter performance highlights. And after my overview, Don will follow with his usual overview of our financial performance. Dan will provide an update on credit, and I'll then return with a discussion of our 2011 expectations and key messages to our investors.

Before getting into details, I want to make a couple of comments to provide some overall perspective. Fourth quarter results capped a good year, a year full of progress in repositioning the company for better long-term growth and improved shareholder returns as we enter 2011. The repositioning has come in two stages. First, in 2009, a year we aggressively addressed our credit issues. Both what was in the portfolio as well as strengthening the current culture in overall risk management of the bank. We said at the end of 2009 that we believed our credit problems had peaked and 2010 results demonstrated that was true.

Today, our credit quality is returning to normal faster than we envisioned even a year ago with the timeframe shortening significantly. Second was 2010, this was a year we addressed and put behind our capital issues, particularly our lower relative level of common equity. Our capital today is stronger than it's ever been and strong on a relative basis as well.

Throughout these two years, we've also developed and implemented a strategic plan designed to grow overall revenues. Our fourth quarter results reflected continued revenue growth over the last eight consecutive quarters. We've repositioned the bank. Huntington's future is bright, and I believe you will see that coming through in our fourth quarter performance. So let's begin with a more detailed discussion starting on Page 8.

We reported net income of $122.9 million or $0.05 a share on a dollar basis. This represented a 22% improvement from the third quarter, as Don will detail, the current quarter's EPS were negatively impacted by a onetime $0.07 per share deemed dividend as a result of repayment of TARP capital in December. The performance drivers were lower provision expense and higher net interest income, trends, we believe, will continue.

Our pretax pre-provision income was $260 million, down just over $5 million or 2% from the third quarter. We noted at the end of the third quarter that we expected pretax pre-provision income to be flattish with the third quarter's $265 million, so the fourth quarter's performance in this respect was less than we expected. This reflected more pressure than expected on net interest margin and softness in non-interest income on the revenue side and a bit more growth in non-interest expense.

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