Huntington(HBAN) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP earnings per common share of $0.26 and adjusted EPS of$ 0.28, with notable items impacting EPS by $0.02 per common share [35] - Net interest income decreased by$ 27 million or 2% to $1,300 million, with net interest margin declining sequentially to 3.01% [71][72] - Return on Tangible Common Equity (ROTCE) was 14.2% for the quarter, adjusted for notable items it was 15.3% [42] Business Line Data and Key Metrics Changes - Average loan balances increased by 1.3% year-over-year, with total commercial loans increasing by$ 691 million [69] - Average deposits increased by $1.1 billion in the first quarter, with a year-over-year increase of$ 4.6 billion or 3.1% [70] - Non-interest-bearing balances decreased by $1.3 billion or 4% from the prior quarter, with expectations for stabilization during 2024 [71] Market Data and Key Metrics Changes - The cumulative deposit beta ended at 43%, consistent with expectations for this point in the rate cycle [70] - Credit quality remained stable with net charge-offs of 30 basis points, which is in the lower half of the through-the-cycle range [56] Company Strategy and Development Direction - The company is focused on executing organic growth strategies, with expectations for accelerated loan growth and sustained deposit growth [67] - Investments in new markets and bankers are expected to support expanding loan pipelines, with a strong emphasis on capital markets, payments, and wealth management [51][52] - The company aims to maintain a strong capital position, with common equity tier 1 at 10.2% and adjusted common equity tier 1 at 8.5% [34][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic environment, noting underlying strength and proactive lending activities [104] - The outlook for net interest income remains unchanged, with expectations for growth driven by accelerating loan growth and effective balance sheet management [66][57] - The company anticipates a higher rate scenario will produce a higher overall net interest margin [74] Other Important Information - The company incurred$ 32 million of incremental expense related to the FDIC Deposit Insurance Fund Special Assessment [53] - The company has reduced its office portfolio by about $500 million over the past four quarters, indicating a cautious approach to commercial real estate [13] Q&A Session Summary Question: What is the outlook for net interest income given the current rate environment? - Management indicated that the outlook for net interest income remains within a range of down 2% to up 2%, primarily due to higher deposit costs [91][106] Question: How is the loan demand and pipeline looking for the upcoming quarters? - Management reported a robust commercial pipeline with strong growth expected in the second quarter, supported by new initiatives and market expansions [93][127] Question: Can you elaborate on the fee income outlook? - The company expects continued expansion in fee income, particularly in capital markets, driven by accelerating commercial loan production [136]