Huntington Bancshares Signals Strong Momentum Despite NIM Trim

Huntington Bancshares ((HBAN)) has held its Q1 earnings call. Read on for the main highlights of the call.

Huntington Bancshares’ latest earnings call struck an overall upbeat tone, with management leaning on strong revenue momentum, accelerating fee growth and rising capital generation to offset a slightly softer outlook for net interest margins. Executives portrayed near‑term margin pressure and integration friction as manageable growing pains on the way to higher profitability targets into 2027.

Adjusted Earnings and Profitability Momentum

Reported EPS came in at $0.25, while adjusted EPS reached $0.37, up 9% from a year earlier and driven by organic growth plus recent partnerships. Management emphasized that this improvement reflects better underlying profitability rather than one‑off items, reinforcing confidence in the sustainability of earnings.

PPNR Surge and Tangible Book Value Gains

Pre‑provision net revenue was a standout, with adjusted PPNR up 36%, showcasing strong operating leverage as revenues outpaced expenses. Tangible book value also rose 9% year over year, underscoring enhanced capital generation and providing a larger buffer to support future growth and shareholder returns.

Net Interest Income Growth and Margin Expansion

Net interest income increased by $301 million, an 18.7% jump from the prior quarter and 33% higher than a year ago, as loan growth and better pricing supported spread income. The net interest margin improved to 3.24%, up 9 basis points sequentially, although management signaled this pace will moderate due to strategic liquidity decisions.

Record Fee Income and Diversified Revenue Engines

Fee income was another major bright spot, with adjusted fee revenue (excluding M&A) up 18% year over year, driven by multiple business lines. Payments revenue rose 21% (about 10% organically), wealth management climbed 19%, capital markets surged nearly 60% excluding acquisitions, and loan and deposit fees advanced 28% (around 18% excluding deals).

Healthy Organic Loan and Deposit Growth

Excluding the Cadence acquisition, end‑of‑period loans increased 1.5% quarter over quarter, or roughly $2.2 billion, reflecting steady demand across core segments. Core deposits, again excluding Cadence, expanded by $3.8 billion, or 2.3% sequentially, with management highlighting growth in primary customer relationships rather than rate‑sensitive hot money.

Strong Liquidity and Capital Position

The bank underscored its conservative balance sheet, noting available contingent liquidity equal to about 173% of uninsured deposits and 69% of deposits fully insured. The unmodified liquidity coverage ratio stands at 118%, while adjusted CET1 remains within the 9%–10% operating range and has increased roughly 30 basis points over the past year.

Integration Progress and Emerging Synergies

On the integration front, Huntington has onboarded roughly 6,000 employees and about 1.5 million new customers, with the Veritex conversion completed and Cadence slated to convert in June. Management said both cost and revenue synergies are tracking to plan, with early upside already evident in capital markets, payments and wealth management.

Capital Returns and Expanded Buyback Program

The company is stepping up capital returns, lifting its 2026 share repurchase plan to $550 million, with more than $250 million already executed year to date, including about $150 million in the first quarter. Roughly 15 million shares have been retired, and the board has approved a new $3 billion authorization to support multi‑year buybacks.

Stable Credit Quality and Post‑Merger Asset Performance

Credit metrics remained well‑behaved, with net charge‑offs at 26 basis points and a criticized asset ratio of 4.3%, levels management described as consistent with expectations following recent mergers. Nonperforming assets stood at 72 basis points, signaling that asset quality is stable and not a current source of earnings risk.

Higher Long‑Term Profitability Ambitions

The bank reiterated that its rolling five‑quarter return on tangible common equity is already in line with the prior 16%–17% target and then raised the bar for the years ahead. Huntington now aims for an 18%–19% ROTCE in 2027, tied to EPS guidance of $1.90–$1.93, implying meaningful upside from current earnings power if execution remains on track.

NIM Guidance Trimmed Amid Strategic Liquidity Build

Management nudged 2026 net interest margin guidance down to the high 3.20s from the mid‑3.30s, with about 7–8 basis points of the change tied to deliberate balance‑sheet actions. Roughly 5 basis points stem from carrying about $4 billion of extra cash at the Federal Reserve, while 2–3 basis points reflect asset optimization and a more cautious view on deposit costs.

Moderated Net Interest Income Outlook

With a softer macro backdrop and a more balanced view on growth, Huntington now expects NII to land at the low end of its previously guided range. The shift is driven by loan growth now trending toward the midpoint of the prior range, instead of the high end, combined with the modest margin pressures flagged during the call.

Strategic Fed Cash Build and Liquidity First Approach

The decision to hold about $4 billion of incremental cash at the Fed was framed as a strategic move to bolster liquidity amid geopolitical uncertainty, even though it weighs on reported NIM. Management stressed that this action has minimal impact on total revenue while reinforcing the bank’s ability to manage through potential market or economic shocks.

Economic Caution and Targeted Loan Rebalancing

Executives acknowledged a somewhat softer economic outlook, prompting a recalibration of loan growth expectations and a more selective approach to new originations. Part of the strategy includes deliberately reducing exposure to construction commercial real estate, trading some near‑term volume for a sturdier risk profile.

Tighter Expense Guidance and Efficiency Push

Expense guidance for 2026 was tightened to the lower half of the 32.5%–33.5% growth range, even as investments in integration and growth remain elevated. Management still expects around 400–450 basis points of full‑year operating leverage and aims to exit the fourth quarter with an efficiency ratio in the mid‑ to low‑54% area.

Integration Risks and Talent Turnover Dynamics

The call acknowledged the complexity of integrating Cadence and Veritex, including some risk around employee retention and culture alignment. While overall retention is described as strong, there has been selective attrition, particularly among acquired producers, as differing credit philosophies and cultural adjustments work through the system.

Market Skepticism and Valuation Disconnect

Analysts highlighted that Huntington’s shares have lagged the broader bank index despite the company maintaining its outlook and boosting buybacks. Management expressed clear frustration with what it sees as a valuation gap, suggesting that investors remain wary about the near‑term outlook or the execution risks embedded in large integrations.

NIM Variability Ahead as Portfolios Reprice

Looking to upcoming quarters, management cautioned that net interest margin could show some choppiness as the Cadence loan portfolio is integrated and optimized. Deposit‑cost relief is still expected, but the pace is now seen as more modest than earlier assumptions, which could introduce quarter‑to‑quarter earnings volatility.

Guidance and Outlook: Growth With Discipline

Updated 2026 guidance reflects slightly slower loan growth focused around the midpoint of prior expectations and a NIM now targeted in the high 3.20s, with the margin reset largely tied to incremental Fed cash and optimization. At the same time, fee revenue growth has been raised to 31%–33%, expense growth narrowed to the low end of its range, operating leverage of about 400–450 basis points reaffirmed, and 2027 EPS of $1.90–$1.93 with ROTCE of 18%–19% reiterated alongside strong capital and liquidity and a sizable buyback plan.

The call painted a picture of a bank trading some near‑term margin upside for balance‑sheet strength while leaning heavily on fee growth and cost control to drive earnings. For investors, Huntington is positioning itself as a high‑return regional franchise with integration and execution risks, but also with clear profitability targets, robust capital returns and a strategy to close the gap between fundamentals and its current market valuation.