Huntington Bancshares Incorporated Q2 FY2025 earnings call

• Strong operating performance with robust organic growth in loans, deposits, and fees, outpacing plans for the year. • Driving strong revenue and profit growth consistent with the strategy shared at Investor Day. • Stable credit performance with low net charge-offs, reflecting proactive loan portfolio management. • Strong financial foundation enabling outperformance in various economic scenarios. • Announced acquisition of Veritex, which offers benefits like a springboard for growth in Texas, new colleagues, and expanded product/service offerings. • Strategic initiatives including a new middle market team in Florida and branch openings in North and South Carolina.

Average loans grew by almost $10 billion year-over-year, with average deposits also increasing by nearly $10 billion. Strategic fee income areas like payments, wealth, and capital markets saw 11% year-over-year growth. Adjusted CET1 reached 9%, net charge-offs were 20 basis points, and tangible book value per share increased 16% year-over-year. The acquisition of Veritex will significantly accelerate growth in Texas, bringing benefits such as a presence in Dallas-Fort Worth and Houston, new colleagues, and expanded capabilities.

• Loan growth range raised to 6%-8% from prior expectations. • Deposit growth range increased to 4%-6%. • Net interest income guidance revised higher to 8%-9% from 5%-7%. • Fee income range maintained at 4%-6%, with potential for higher end based on second half performance. • Expense growth forecast at 5%-6%. • Net charge-off guidance lowered to 20-30 basis points. • Q3 expected loan growth ~1%, deposits flat into Q3, net interest income stable, fee revenues ~$550M, expenses ~$1.220B.

• Economic uncertainty, which could present headwinds. • Potential competition in loan growth leading to higher costs. • Impact of interest rate changes on net interest margin (NIM).

Q: Zach, a question for you on the new net interest income guidance range. It feels like you have enough momentum to hit the higher end of that range. But curious in your mind what you see as the threats to hitting that higher end?

A: Yes. Great question, Jon. Thank you. And I would agree, we are well on track to potentially hit the higher end of that range. As we give these ranges, we always want to be a little conservative given the uncertainty, but I think hitting the higher end of the range is certainly in the cards for us. And when I think about the kind of the ingredients to that, we are tracking well in the loan growth range, feeling really good about the momentum in loans, particularly even just into the third quarter here starting off very, very nicely. And then NIM, I think I'm sure we'll unpack NIM in further questions, but generally expecting NIM to be quite stable here in the back half of the year, and those 2 things together should be the product of that. I think I don't feel, to be honest, a lot of threat against that range. But I think the biggest thing that we're watching clearly is just the stability of the economic environment and the stability of the environment vis-a-vis some of the uncertainties that emerged earlier in the year. It doesn't appear that those are coming back in any substantial way, but were they too that, that could potentially present a headwind.

Q: Steve or Brant, can you give us some of the feedback you've heard maybe pro and cons from internal and external partners on the Veritex acquisition announcement? I think some expected you to be acquisitive, others did not, given the core momentum. But just curious what kind of feedback maybe positive or negative that you received?

A: John, I'll start, but I'm going to pass it to Brant because he's really been out front leading the diligence, and he'll lead the integration as well. We've gotten very good feedback. And we had encouragement over the last couple of years if we -- from some of our long shareholders, if we saw an opportunity to make a strategic acquisition to -- given the success of TCF to look hard at it. Now this one came together very quickly. It happened to be ideal for us because our focus has been Dallas and Houston. And as you saw on Monday from the announcement, we already have a sizable presence in Texas, and we've been there since 2009. We really like this Veritex team and Malcolm staying with us is a huge deal. We were there Wednesday and Thursday and met many of the employees, and we've got some great new colleagues coming on board. Brant, what would you like to add to that?

A: Jon, really good question. We -- as Steve mentioned, we were there the last 2 days, and I'll tell you, we left even more impressed with the colleagues and even more opportunistic about the opportunity that exists. As we mentioned on the call Monday, there are a number of synergies that we believe exist, whether it's expanding retail banking, wealth offerings, expanding in our commercial bank and some of our specialty offerings there, new geographies that this potentially opens. All of those things we leave even more encouraged about the opportunity that exists