Huntington CEO Discusses Credit Card Play and 'Very Strong' Q3 (Update 1)

  • Third-quarter EPS of 20 cents.
  • EPS incudes 3-cent benefit from pension curtailment, 1 cent extraordinary expenses
  • Operating EPS of 18 cents beats consensus estimate of 17 cents
  • 22 branches consolidated during Q3
  • Net interest income flat
  • Mortgage revenue down 30% from Q2, following industry trend
  • Average loans grow 2% from Q2, 5% year-over-year

Updated from 7:52 a.m. ET with early market action and comment from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- Huntington Bancshares ( HBAN) made the best of a transitional third quarter, which included a 30% sequential drop in mortgage income, by taking some major steps to lower its expenses.

The Columbus, Ohio, lender Thursday reported third-quarter earnings of $178.5 million, or 20 cents a share, increasing from $150.7 million, or 17 cents a share, in the second quarter, and $167.8 million, or 19 cents a share, during the third quarter of 2012.

The third-quarter results included a one-time gain of $34 million, or 3 cents a share, "related to pension curtailment," as well as a charge of $17 million, or a penny a share, related to the consolidation of 22 branches.

Excluding those items, Huntington's third-quarter operating earnings 18 cents a share beat the consensus estimate of 17 cents, among analysts polled by Thomson Reuters.
Huntington CEO Stephen Steinour

Huntington's third-quarter net interest income came to $424.9 million, unchanged from the previous quarter, but down slightly from $430.3 million a year earlier. The net interest margin narrowed to 3.34% in the third quarter from 3.38% in the second quarter and 3.38% in the third quarter of 2013.

Average loans grew 2% to $41.999 billion from $41.280 billion in the second quarter, and were up 5% from $40.120 billion in the third quarter of 2012. Commercial and industrial loans were flat sequentially but up 4% year-over-year, to $17.0 billion. With the company not conducting any auto loan securitizations this year, auto loans were up 15% quarter-over-quarter and 49% year-over-year, to $6.1 billion. Huntington CEO Stephen Steinour says the bank has no plans to do an auto loan securitization because "automobile loan yields are relatively more attractive than similar duration securities and because of the recent decline in estimated securitization gains."

Other large regional lenders with Midwest footprints showed solid third-quarter loan growth. U.S. Bancorp ( USB) of Minneapolis on Wednesday reported core loan growth of 2.2% during the third quarter from the second quarter, with average loans growing 7.5% year-over-year.

KeyCorp ( KEY) of Cleveland on Wednesday reported a 1% increase in average loans during the third quarter, with average loans growing 5% from a year earlier.

Huntington rolled out a consumer credit card during the third quarter, which Steinour says "has two market leading options, revolving around choice of rewards and a very low interest rate. The bank has also applied its "24-Hour Grace" policy to the new card product, in not penalizing customers who make loan payments one day late.

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