Huntington Bancshares Profit Rises 21% (Update 1)

  • Huntington Bancshares reports first-quarter earnings per share of 17 cents.
  • Analysts were expecting EPS of 14 cents.
  • Noninterest income grew 24% from the fourth quarter and 21% year over year.

Updated with interview comments from Huntington CEO Stephen Steinour.

NEW YORK ( TheStreet) -- Huntington Bancshares ( HBAN) on Wednesday reported a 21% earnings increase, with boosts from auto loan securitizations and very strong mortgage volume.

The Columbus, Ohio, lender reported first-quarter earnings of $153.3 million, or 17 cents a share, compared to $126.9 million, or 14 cents a share, during the fourth quarter, and $126.4 million, or 14 cents a share, during the first quarter of 2011.
Huntington Bancshares CEO Stephen D. Steinour

The first-quarter earnings came in ahead of the 14-cent estimate among analysts polled by Thomson Reuters.

The company's noninterest income increased 24% from the fourth quarter and 21% year over year to $285.3 million, reflecting $23 million in gains on auto loan securitizations and $46.4 million in mortgage banking income. The mortgage income increased from $24.1 million the previous quarter and $22.7 million a year earlier, and was "driven by an $11.6 million net mortgage servicing rights (MSR) improvement and a $10.1 million increase in origination and secondary marketing income."

Huntington reported that its average commercial and industrial loans grew at a 17% annualized pace during the first quarter. The average balance for these loans was $14.8 billion in the first quarter, increasing 4% sequentially and 13% year over year.

Average total loans and leases were $38.2 billion in the first quarter, declining slightly from the fourth quarter but increasing 4% year over year, as the increase in commercial and industrial loans was partially offset by declining consumer loan balances.

Huntington saw its strong deposit growth continue, with noninterest bearing checking account deposits growing 5% sequentially and 54% year over year to $11.3 billion during the first quarter. The company's net interest margin -- the difference between its average yield on loans and investments and its average cost for deposits and wholesale borrowings -- was 3.40% during the first quarter, increasing from 3.38% the previous quarter, but down slightly from 3.42% a year earlier.

The first-quarter results were also boosted by an $11.4 million bargain purchase gain from the company's acquisition of the failed Fidelity Bank of Dearborn, Mich., from the Federal Deposit Insurance Corp. on March 23.

Huntington's noninterest expenses increased 8% sequentially and 7% year over year to $462.7 million during the first quarter, mainly because of a $23.5 million addition to litigation reserves.

CEO Stephen Steinour said that Huntington's "mortgage banking and our best-in-class indirect automobile businesses are performing as expected and taking full advantage of the current market conditions," adding that the company's "focus on growing consumer households and commercial relationships and improving product cross-sell continued to positively impact financial performance and demonstrates our ability to grow revenue and protect the net interest margin despite the low interest rate environment."

The first-quarter return on average assets was 1.13%, increasing from 0.92% in the fourth quarter and 0.96% in the first quarter of 2011. The return on average common equity was 11.4% during the first quarter, increasing from 9.3% the previous quarter, and 10.3% a year earlier.

Steinour says that Huntington's "emphasis on relationships is increasing results for us, as we are growing checking households every quarter, faster than we did per year, just a couple of years ago."

The CEO adds that the "strategy is working," as the growing number of checking accounts "is translating into revenue, and we're making progress in growing revenue, and in growing the bank."

Regarding loan growth, Steinour says "we have had commercial loan growth for nine quarters in a row, so we're starting to operate at a higher level."

Huntington's shares closed at $6.35 Tuesday, returning 16% year to date, following a 19% decline during 2011.

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The shares trade for 1.2 times their reported March 31 tangible book value of $5.33, and 10 times consensus 2013 EPS estimate of 65 cents. The consensus 2012 EPS estimate seems quite low, at 59 cents.

Huntington Bancshares in March announced that its board had approved $182 million in share buybacks.

Based on a 4-cent quarterly payout, the shares have a dividend yield of 2.52%.

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

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

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

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 TheStreet.com 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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