Huntington Bancshares: Pullback Loser

NEW YORK ( TheStreet) -- Huntington Bancshares ( HBAN), was the loser among major U.S. financial names on Wednesday, with shares sliding 2.2% to close at $8.27.

With the market rate on 10-year U.S. Treasury bonds rising by 95 basis points since the end of April, Huntington -- an asset-sensitive bank -- had seen its shares rise by 9% over the previous two weeks through Tuesday's close.

In its first-quarter 10-Q filing, Huntington said that in a scenario of a parallel rise in market rate of 100 basis points, its interest income would increase by 37.1% over a one-year period, while its interest expense would increase by only 33.5%. But what we have actually seen over the past two months is a steepening of the yield curve, with long-term rates rising as short-term rates remaining very low, because the Federal Reserve continues to keep its target federal funds rate in a range of zero to 0.25%.

In an interview on Wednesday, KBW analyst Christopher Mutascio said the run-up in stocks of asset-sensitive banks was misguided.

The broad indexes on Wednesday ended mixed, following a report from China that its exports during June had declined 3.1% from a year earlier, and the release of minutes from the most recent Federal Open Market Committee meeting, indicating the Federal Reserve could curtail its bond-buying as early as September.

The KBW Bank Index ( I:BKX) was down 1% to close at 63.93, with all but two of the 24 index components showing declines.

One day after federal regulators proposed doubling a key capital requirement for the nation's largest banks, most analysts agreed that the higher supplementary Basel III Tier 1 leverage ratio requirement would do little to curtail banks' plans to deploy capital through dividend payouts and share buybacks.

The nation's largest banks will kick off their second-quarter earnings season on Friday with JPMorgan Chase ( JPM) and Well Fargo ( WFC) set to announce their results before the market open.

Analysts polled by Thomson Reuters estimate JPMorgan will post second-quarter earnings of $1.44 a share, declining from $1.59 in the first quarter, but increasing from $1.21 during the second quarter of 2012.

For Wells Fargo, the consensus second-quarter EPS estimate is 93 cents, increasing from 92 cents the previous quarter and 82 cents a year earlier.

Mutascio on Wednesday said JPMorgan represented the best value for investors in an overvalued banking sector, saying the bank was trading at a 16% discount to the median large-cap bank on a price-to-earnings basis. The analyst cited JPMorgan's highly liquid position as long-term rates rise, and also touted the firm's cost-cutting efforts. "JPM's cost containment efforts have been one of the most impressive in the group when looking at a year-over-year personnel expenses (down 2.3% year-over-year versus the median increase of 2.6%)," he said.

Mutascio's price target for JPMorgan's shares is $58, which implies little upside from Wednesday's closing price of $54.83, but the analyst called his price target "conservative."

JPMorgan also pays a quarterly dividend of 38 cents a share, for a yield of 2.77%. The company was approved by the Federal Reserve in March to repurchase up to $6 billion in common shares through the first quarter of 2014.

JPM Chart JPM data by YCharts

Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.

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

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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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