Huntington Bancshares Incorporated Q4 FY2024 earnings call

Building on a strong third quarter, Huntington delivered very strong fourth quarter results. It drove record fee revenues and accelerated growth of loans and deposits, with contributions from both existing and new businesses. It executed down beta action plans and lowered deposit pricing to manage net interest margin in a dynamic interest rate environment. It achieved strong credit performance due to disciplined client selection and rigorous portfolio management. Through execution of growth strategies, it is driving profit momentum into 2025 and beyond. In 2024, average deposits grew by over $7.5 billion and average loans by over $3.5 billion. Fee revenue businesses performed exceptionally well, including payments (with growth in commercial payment revenues and new merchant acquiring model), wealth management (advisory household relationships up 9% year-over-year and wealth assets gathered), and capital markets (set a new quarterly revenue record of $120 million in Q4, up 74% from the prior year).

Average loan balances increased by $7 billion or 5.7% versus the previous year. Average deposits saw an increase of $9.7 billion or 6.5% compared to last year. In the fourth quarter, loan growth year-over-year was 5.7%, up from 3.1% in Q3. Sequentially, average loan balances rose by $3.7 billion or 2.9%. Average deposits in the fourth quarter increased by $2.9 billion or 1.9%. Non-interest-bearing deposits expanded by approximately $800 million on average, accounting for 18.6% of total deposits. Fee revenues as a percentage of total revenue went up to 28% from 26% the prior year.

Expect robust loan growth with balances projected to increase between 5% and 7% for the full year. Deposits are expected to sustain growth with balances rising between 3% and 5%. Net interest income on a dollar basis is seen growing between 4% and 6% this year. Non-interest income is expected to grow between 4% and 6% in 2025. Expense growth is anticipated between 3.5% and 4.5%. Net charge-offs for the year are expected to be between 25 and 35 basis points. The effective tax rate for the year is projected to be approximately 19%.

Dynamic interest rate environment which can impact net interest margin. Geopolitical and policy uncertainties that may affect business operations and financial performance.

Q: Can you talk about the confidence around the NII guidance range?

A: Zach Wasserman said they're very confident in driving revenue growth within the range, with loan growth and earnings asset growth driving revenue performance this year and the range set at an achievable level.

Q: You're growing loans faster than deposits this year, what's driving that?

A: Zach Wasserman said about 60% of loan growth coming from core, 40% from new initiatives, and they've prefunded loan growth with deposits and will continue to drive beta plan and lower deposit pricing.

Q: Can you help us with the new money loan production yield?

A: Zach Wasserman said yields are consistent with spread levels, with fixed and variable asset production keyed off different parts of the curve.

Q: Hoping to talk about capital, CET1 at 10.5%, adjusted for AOCI 8.7%, targeting 9%-10%, how long for buybacks?

A: Zach Wasserman said 2025 will depend on loan growth and yield curve, with little capacity for share repurchases in near term, but expect to return to normal distribution over longer term.

Q: Loan-to-deposit ratio, expectations around incremental margin and incremental cost of deposits?

A: Zach Wasserman said marginal spreads consistent, acquisition deposit rates coming down, NIM to rise as yield curve normalizes.

Q: Fee outlook around payments, wealth management, cap market, how much tied to lending?

A: Zach Wasserman said fee strategies support core business, broadly correlated but also independent, expecting high single-digit to low double-digit growth in revenues.

Q: Your '25 loan and deposit growth guide, why decelerate?

A: Zach Wasserman said sustaining current run rate, deposit growth deceleration reflective of not needing to grow deposits as much and managing loan-to-deposit ratio, Steve Steinour added seasonality factor.

Q: Eight states and three verticals, standout on good side, any new verticals or states?

A: Zach Wasserman said invested in core markets, new geographies, and verticals, RMs added, doing well, may have additional specialty verticals but not at rapid pace.

Q: Borrower feedback and core growth, sentiment and what drives core growth?

A: Steve Steinour said borrower sentiment positive post-election, expected growth, record asset finance in fourth quarter, core growth with seasonality and CRE close to bottoming out.

Q: Regulatory changes, what would help Huntington?

A: Steve Steinour said pro-business orientation, more stability in banking, address Basel III, constructive dialogue on oversight.

Q: NIM components, outlook for full year?

A: Zach Wasserman said NIM expected to be about flat in 2025, rising in 2026 and beyond, driven by fixed asset repricing, deposit pricing, and hedging.

Q: Securities repositioning, planning more?

A: Zach Wasserman said repositioning was tactical, selling $1 billion of corporate securities to unlock capital, not likely to do more significant repositioning.

Q: Investment cycle, where are you?

A: Steve Steinour said not at end of investment cycle, have momentum, will press forward, more on IR Day.

Q: Stress test, how do you feel?

A: Zach Wasserman said stress capital buffer at minimum, run internal stress tests, confident in capital base; Steve Steinour added strong deposit franchise and capital position.

Q: Provisioning for reserve, where do you see puts and takes?

A: Zach Wasserman said maintain rigorous reserve, expect ACL coverage ratio to decline with good economic performance and loan growth.

Q: M&A, on priority list?

A: Steve Steinour said priority is organic growth, but have capacity to do M&A if makes sense, like TCF was a success.