Huntington Bancshares Incorporated Q1 FY2025 earnings call

• Sustained momentum from year-end through Q1 with robust loan and deposit growth.
• Driving revenue and profit growth through earning asset growth, expanded net interest margin, value-added fee revenues, and disciplined expense management.
• Strong credit performance with net charge-offs at 26 basis points and allowance for credit losses at 1.87%.
• Investments in value-added fee revenues, including growth in payments, wealth management, and capital markets.
• Expanded branch expansion plans in North and South Carolina, and invested in talent with new verticals like Financial Institutions Group and Aerospace and Defense.
• Capital levels improved with adjusted CET1 at 8.9%, and Board approved $1 billion share repurchase authorization.

Average loans grew by almost $9 billion year over year, with commercial loans contributing. Average deposits increased by almost $11 billion year over year. Net interest income grew $31 million or 2.2%, with net interest margin at 3.1%. Non-interest income increased 6% year over year, driven by payments, wealth management, and capital markets. Loan balances grew for six consecutive quarters, with new initiatives accounting for about half of the growth. Deposits grew by $2.2 billion, with a 13 basis point reduction in the cost of deposits.

• Loan growth expected 5%-7% for the year, with Q2 sequential average loan growth expected 1%-2%.
• Net interest income guidance revised to plus 5%-7% dollar growth.
• Fee revenues tracking within 4%-6% range.
• Expense growth tracking 3.5%-4.5%.
• Credit net charge-offs expected 25-35 basis points for the year.
• Q2 expects deposits to grow, net interest income to grow modestly, fee revenues to grow from Q1 low, and expenses around $1.17 billion.

• Economic uncertainty and potential headwinds in the banking industry.
• Tariff impacts on certain sectors like equipment finance and distribution finance.
• Challenges with deal-making activity in capital markets affecting non-interest income growth.

Q: Net interest margin came in higher than expected. Should we think about flat net interest margin trends relative to 3.10 or take out interest recoveries?

A: Deposit pricing was the big driver, achieved 37% deposit beta in Q1, run rate around 3.07 expected for remainder of year with flat within reasonable range.

Q: Thoughts on $1 billion buyback authorization?

A: Consistent capital allocation approach, expect to buy back modestly this year and continuing forward depending on economic situation.

Q: Deposit cost progress and success?

A: Result of consistent down beta plan, reducing CD mix, shortening duration, acquiring in money market, segmented pricing, and selective reduction on existing segments.

Q: New loan yields on new initiatives?

A: New yields consistent with overall production yields, not leveraging aggressive pricing, driven by experienced bankers and vertical expertise.

Q: Client sentiment since April 2nd and loan growth guide?

A: Mixed sentiment with some sectors bullish and others impacted by tariffs, Q2 loan growth expected strong with pipeline similar to Q1.

Q: Risk management focus?

A: Active outreach to customers, broad-based portfolio management, and emphasis on constructive view to support customers.

Q: Non-interest income guide and capital markets bounce back?

A: Modest sequential growth, 11% year-over-year growth in key fee areas, cap markets growth supported by commercial loan production, with M&A advisory affected by deal delays.

Q: CECL model and reserve levels?

A: Model incorporates multiple scenarios, reserve coverage strong, with some timing issues affecting criticized loan metrics.

Q: Pipeline for Carolinas, Texas, and verticals?

A: Continuing to build out, adding verticals, accelerating branch expansion in Carolinas, and investing in talent in various markets.

Q: Hedging program drag trajectory?

A: Expected to be neutral through end of 2025, with hedge drag expected to reduce to neutral by mid-year and then potentially increase slightly by year-end.