Huntington Bancshares Incorporated Q3 FY2025 earnings call

• Key messages: Execution of growth strategy with excellent results, top-tier profitability, and poised to accelerate growth in Texas with Veritex acquisition.
• Loan growth drivers: Geographic expansion in Texas, North and South Carolina, and strong performance in funds finance and financial institutions group.
• Deposit growth: Driven by growing households and deepening primary bank relationships with disciplined pricing.
• Operational leverage: Trailing twelve-month adjusted positive operating leverage at 500 basis points, full-year 2025 operating leverage expected to be more than 2.5 percentage points.

Loan growth accelerated to 9.2% year over year, led by commercial lending and new initiatives, with new initiatives accounting for $1.2 billion (40% of total loan growth). Core loan growth included contributions from various segments. Average deposits increased by $1.4 billion or 0.8%, with the cost of deposits declining by two basis points. Net interest income grew approximately $40 million or 2.7% sequentially, with net interest margin at 3.13% for Q3. Noninterest income increased 14% or $75 million year over year, with strength in payments, wealth management, and capital markets.

• Loan growth: Standalone Huntington expects high end of 8% full-year loan growth; inclusive of Veritex, 9% to 9.5%.
• Deposits: Standalone Huntington at high end of prior growth guidance at ~5.5%; inclusive of Veritex, ~6.5% to 7%.
• Net interest income: Standalone Huntington full-year guidance increased by 2 percentage points to 10-11% from 8-9%, driven by better loan growth and higher NIM.
• Operating leverage: Full-year 2025 operating leverage expected over 2.5 percentage points, with plans to continue driving fundamental reengineering of cost base.

• Economic and policy uncertainty: Persistent throughout the year, but company continues to perform well.
• Credit quality: While current net charge-offs are low, monitoring is ongoing, but company has a moderate to low risk appetite and active portfolio management.

Q: On loan growth outlook, can you talk about core trends?

A: Zachary Wasserman mentions strong momentum in core business segments like regional banking, commercial specialty, and consumer auto, expecting 1.5% sequential growth in Q4 and mid to high single digits in 2026 loan growth.

Q: About credit quality and safeguards against fraud?

A: Brendan Lawlor discusses disciplined client selection, active portfolio management, and relationship orientation as safeguards, with NDFI portfolio exposure ~2% of total loans.

Q: On operating leverage and medium-term trends?

A: Zachary Wasserman explains that operating leverage is rising from less than 1% in budget to over 2.5%, with plan to drive 1%+ operating leverage annually by reengineering cost base and funneling into investments.

Q: On strategic M&A and organic growth?

A: Stephen Steinour states focus on organic growth through strategies like Texas expansion with Veritex, and Carolinas build-out, with M&A considered but primary focus on organic growth.

Q: On NII guidance and NIM assumptions?

A: Zachary Wasserman mentions NII growth driven by loan growth and NIM expansion, with fixed asset repricing a key driver of NIM expansion in 2026.

Q: On deposit pricing and beta outlook?

A: Zachary Wasserman states deposit teams executing well, with 40% beta in last two weeks of Q3, expecting 40% beta over rate cycle, and NIM expansion from fixed asset repricing.