Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q2 2022 Earnings Presentation
51 slides from Huntington Bancshares's earnings presentation, Jul 21, 2022
Slide 1: 2022 Second Quarter Earnings Review
2022 Second Quarter Earnings Review July 21, 2022 The Huntington National Bank is Member FDIC. ®, Huntington® and Huntington. Welcome.® are federally registered service marks of Huntington Bancshares Incorporated. ©2022 Huntington Bancshares Incorporated.
Slide 2: Disclaimer
Disclaimer CAUTION REGARDING FORWARD‐LOOKING STATEMENTS This communication contains certain forward‐looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical facts and are subject to numerous assumptions, risks, and u
Slide 3: Huntington: A Purpose-Driven Company
Huntington: A Purpose‐Driven Company Our Purpose Our Vision We make people’s lives Become the better, help businesses country’s leading thrive, and strengthen people‐first, digitally the communities we powered bank serve Purpose Drives Performance Drive organic growth across all business segments
Slide 4: Key Messages
Key Messages Record net income driven by sequential PPNR growth, supported by expanded 1 net interest income due to continued loan growth (10% annualized) and higher interest rates Average deposits increased quarter‐over‐quarter, in both commercial and 2 consumer categories; focused on growing prima
Slide 5: 2022 Second Quarter Strategic Highlights
2022 Second Quarter Strategic Highlights Executed on strategic priorities, adding capabilities, driving profitable growth Core Business Execution Enterprise Payments Capstone Acquisition Sequential PPNR growth of 17%; Announced the formation of an Completed June 15 committed to positive operat
Slide 6: CCAR Modeled Loan Loss Rates
CCAR Modeled Loan Loss Rates HBAN’s modeled loss rates consistently among the lowest in peer rankings CCAR Cumulative Loan Losses as a % of Average Total Loans(1) 2020 2015 2016 2017 2018 2020 Resubmission 2022 HBAN 4.2% Peer 1 4.4% Peer 1 4.2% Peer 1 5.2% HBAN 5.1% Peer 1 5.9% Peer 1 5.7% Peer 1 4.
Slide 7: TCF Target Achievements
TCF Target Achievements Delivered successful integration, added capabilities, expanded to new markets Commitment Outcome Execute close and conversion Closed transaction in < 6 months 1 with focus and urgency Completed conversion in four months after close with operational rigor Deliver cost syne
Slide 8: 2022 Second Quarter Financial Performance
2022 Second Quarter Financial Performance Robust loan growth, lower expenses, excellent credit quality EPS ROTCE Efficiency Ratio GAAP Reported $0.35 19.9% 57.3% Adjusted $0.36 20.6% 56.0% Total average loans +$2.8 billion, or +2.5% QoQ (loans ex‐PPP +$3.3 billion, or +3.0% QoQ) Commercial avera
Slide 9: Pre-Provision Net Revenue
C Pre‐Provision Net Revenue Record PPNR growth; driving revenue growth, focused on controlling expenses, and investing in revenue‐producing initiatives Driving sustained profitability, delivering positive operating leverage Annual Pre‐Provision Net Revenue Quarterly Pre‐Provision Net Revenue See rec
Slide 10: Loans and Leases
Loans and Leases Broad‐based loan growth led by C&I and residential real estate Total Loan and Lease Balances Highlights Vs Linked Quarter Average Total loans increased $2.8 billion or 2.5%, loans ex PPP increased $3.3 billion or 3.0% Commercial balances increased $1.5 billion or 2.5%, commercia
Slide 11: Deposits
Deposits Deposit balances increased in both commercial and consumer portfolios Total Deposits Vs Linked Quarter Total average balances increased $2.1 billion, or 1.5%. Total average commercial deposits increased $2.1 billion, or 3.5%, driven by higher demand deposits and money market Total ave
Slide 12: Net Interest Income
C Net Interest Income Net interest income expansion driven by higher NIM and average loans Net Interest Income (FTE) Highlights Vs Linked Quarter Net interest income increased $113 million or 9.8% QoQ reflecting higher NIM and average total loans Net interest income ex PAA and PPP increased $125
Slide 13: Stable Core Deposit Base
C Stable Core Deposit Base Positioned well for rising rate environment Funding Base Low‐cost Deposit Base Funding Balance Sheet 3Q15 1Q22(2) Better starting point with lower loan‐to‐deposit ratio (1) Loan‐to‐deposit ratio 92% 79% Beginning cycle total costs of deposits 12 basis points lower comp
Slide 14: Balance Sheet Management
Balance Sheet Management Dynamic hedging strategy; positioned for higher rates while managing downside Comprehensive Balance Sheet Management Strategy Proactive management to protect net interest Securities portfolio positioned to capitalize on income while benefitting from rising rates higher yield
Slide 15: Noninterest Income
Noninterest Income Continued growth in key categories, offset by gain on sale and mortgage banking Noninterest Income Highlights Vs Linked Quarter $535 $515 Capital markets higher $12 million, or 29%, reflecting $499 $485 $444 positive trends and strength in numerous areas, including interest rate
Slide 16: Noninterest Expense
Noninterest Expense Disciplined expense management and cost synergies drive sequential expense reductions Noninterest Expense Highlights $ in millions Vs Linked Quarter $1,289 $1,221 Noninterest expense of $1,018 million, a reduction of $1,072 $234 $1,053 $1,018 $35 million or 3.3% $187 $46 $269 $
Slide 17: Capital Positioning and Management
Capital Positioning and Management Managing capital consistent with our aggregate moderate‐to‐low risk profile and target operating range Common Equity Tier 1 Ratio Highlights Target operating range Continued to operate CET1 within target operating 10.0% range of 9% to 10% 9.6% Peer leading divi
Slide 18: Asset Quality and Reserve Trends
Asset Quality and Reserve Trends Exceptional credit quality; low net charge‐offs and nonperforming assets combined with strong coverage ratio Net Charge‐off Ratio Allowance for Credit Losses (ACL) $ in millions $2,322 $2,205 $2,168 $2,107 $2,109 0.28% 0.20% 2.17% 2.06% 1.92% 1.88% 0.12% 2.09% 0.07%
Slide 19: Achieved Medium-Term Financial Goals
Achieved Medium‐Term Financial Goals Driving organic revenue growth and profitability to deliver leading financial performance Total Revenue Return on Tangible Efficiency Ratio ≥ Nominal GDP Common Equity 17%+ 56% ROTCE (GAAP) Adjusted ROTCE ER (GAAP) Adjusted ER 83.1% 20.6% 74.9% 19.1% 73.0%
Slide 20: 2022 Outlook
2022 Outlook Robust PPNR expansion driven by revenue and loan growth; realizing cost savings 4Q22 vs. 4Q21 Commentary Prior Guidance Updated Guidance As of 6/15/22 As of 7/21/22 Average Loans (ex‐PPP) Driven mainly by commercial, as well as Non‐GAAP Up high single digits Up high single digits 4Q21 b
Slide 21: Uniquely Positioned to Drive Substantial Value Creation
Uniquely Positioned to Drive Substantial Value Creation People‐First, Digitally‐Powered with best‐in‐class capabilities Top regional bank with scale and leading market density Powerful Strength in 11‐state footprint and select national commercial & consumer franchises Franchise Market‐leadin
Slide 22: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Pre‐Provision Net Revenue (PPNR) Pre‐Provision Net Revenue ($ in YTD22 2017 2018 2019 2020 2021 4Q21 1Q22 2Q22 millions) Annualized Total revenue $4,309 $4,510 $4,667 $4,815 $5,991 $1,647 $1,645 $1,746 $6,782 FTE adjustment 50 30 26 21 25 6 8 6 28 Total revenue (FTE) a 4,359
Slide 23: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Tangible common equity, ROTCE ($ in millions) 2Q22 Average common shareholders’ equity $16,062 Less: intangible assets and goodwill 5,613 Add: net tax effect of intangible assets 46 Average tangible common shareholders’ equity (A) $10,496 Net income available to common $511 A
Slide 24: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Noninterest expense, Efficiency Ratio, NIM % Efficiency Ratio ($ in millions) – Pre‐tax 2Q21 3Q21 4Q21 1Q22 2Q22 Noninterest expense (GAAP) $1,072 $1,289 $1,221 $1,053 $1,018 Less: intangible amortization 11 13 14 14 13 Noninterest expense less amortization of intangibles (A)
Slide 25: Non-GAAP Reconciliation
Non‐GAAP Reconciliation EPS, ACL ratio ex. PPP loans Pre‐tax impact After‐tax impact EPS ($ in millions, except per share amounts) 2Q22 amount amount Earnings Per Share (GAAP) $0.35 Add: Acquisition‐related net expenses $24 $19 0.01 Adjusted Earnings Per Share (Non‐GAAP) $0.36 ACL ratio ex. PPP loan
Slide 26: Non-GAAP Reconciliation
Non‐GAAP Reconciliation Tangible common equity ratio ($ in millions) 2Q21 3Q21 4Q21 1Q22 2Q22 Huntington shareholders’ equity $20,511 $19,479 $19,297 $18,452 $17,950 Less: preferred stock 2,851 2,267 2,167 2,167 2,167 Common shareholders’ equity $17,660 $17,212 $17,130 $16,285 $15,783 Less: goodwill
Slide 27: Appendix
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Slide 28: Basis of Presentation
Basis of Presentation Use of Non‐GAAP Financial Measures This document contains GAAP financial measures and non‐GAAP financial measures where management believes it to be helpful in understanding Huntington’s results of operations or financial position. Where non‐GAAP financial measures are used, th
Slide 29: Basis of Presentation
Basis of Presentation Rounding Please note that columns of data in this document may not add due to rounding. Notable Items From time to time, revenue, expenses, or taxes are impacted by items judged by management to be outside of ordinary banking activities and/or by items that, while they may be a
Slide 30: Table of Contents
Table of Contents Capstone Overview 31 Capstone Revenue Synergies 32 TCF Revenue Synergies 33 Purchase Accounting Detail 34 Digital Metrics 35 Mortgage Banking Noninterest Income 36 Balance Sheet 37 Consumer Originations Detail 38 Wholesale Funding 41 Balance Sheet Management 42 Shares Outstanding 4
Slide 31: Capstone Partners Acquisition
Capstone Partners Acquisition Capstone adds approximately 50% to capital markets revenues Capstone Transaction Overview Overview Announced March 1, 2022 Closed June 15, 2022 An independent, at scale, middle market Regulatory approval (FINRA) investment bank and advisory firm, with expertise
Slide 32: Capstone Revenue Synergies
Capstone Revenue Synergies Leveraging Capstone’s recognized expertise with Huntington’s scale and footprint Complementary deal with existing and new industry verticals, Revenue Synergies accelerating growth and diversifying revenue Leverage the power and depth of Huntington 1 relationships to acce
Slide 33: Revenue Synergy Opportunities
Revenue Synergy Opportunities Leveraging expertise and capabilities to expand and deepen relationships Expanded markets and increased capacity and scale Middle Market, Corporate and Deepening via enhanced treasury management and capital markets capabilities Specialty Expansion 1 Introduce comp
Slide 34: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Projected ($ in millions) 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Loans and Leases $8 $25 $20 $16 $13 $7 $7 $6 $5 Long‐term Debt 1 7 4 4 4 3 3 3 3 Deposits 1 4 1 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ Other (0) (0) 0 (1) (1) 0 (0) (0)
Slide 35: Consumer and Business Banking Digital Metrics
Consumer and Business Banking Digital Metrics Digital Engagement Digital Originations Average Monthly Active Digital Users(1) New Consumer Deposit Accounts(3) (Millions) Includes Checking, Savings, MMA TCF 3.20 3.26 3.28 49% 2.39 2.42 40% 42% 40% 37% 2Q21 3Q21 4Q21 1Q22 2Q22 2Q21 3Q21 4Q21 1Q22 2Q22
Slide 36: Mortgage Banking Noninterest Income Summary
Mortgage Banking Noninterest Income Summary $100 Mortgage Banking Income (MBI) Salable Production Mix $81 $80 $67 $84 $61 18% $69 $1 $60 $49 49% 49% 52% 48% $60 $4 $44 $45 $11 $40 3.01% 3.27% $33 82% $20 2.38% 2.45% 2.02% 51% 51% 52% $- 48% $(2) $(3) $(20) 2Q21 3Q21 4Q21 1Q22 2Q22 2Q21 3Q21 4Q21 1Q2
Slide 37: Balance Sheet
Balance Sheet (4) Huntington Welcome: : JOC ATX
Slide 38: Automobile – Production Trend
Automobile – Production Trend Originations 2Q22 1Q22 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 2Q20 Amount ($ in billions) $1.8 $1.7 $1.8 $1.8 $1.9 $1.4 $1.4 $1.7 $1.2 % new vehicles 38% 41% 40% 38% 47% 49% 54% 48% 36% Avg. LTV 84% 84% 84% 85% 84% 87% 86% 89% 90% Avg. FICO 778 774 776 772 770 771 774 777 770 Vi
Slide 39: Vehicle Finance – Origination Trends
Vehicle Finance – Origination Trends Auto Loans: 2022 YTD 2021 2020 2019 2018 2017 2016 2015 Originations ($ in billions) $3.5 $6.9 $5.9 $6.1 $5.8 $6.2 $5.8 $5.2 % new vehicles 39% 43% 47% 46% 47% 50% 49% 48% Avg. LTV(1) 84% 85% 89% 90% 89% 88% 89% 90% Avg. FICO 776 772 775 772 766 767 765 764 Weigh
Slide 40: Residential Mortgage and Home Equity Origination Trends
Residential Mortgage and Home Equity Origination Trends Residential Mortgage: 2022 YTD 2021 2020 2019 2018 2017 2016 2015 Originations ($ in billions) $3.2 $6.6 $4.7 $2.9 $2.9 $2.7 $1.9 $1.5 Avg. LTV 80% 76% 77% 81% 83% 84% 84% 83% Avg. FICO 767 768 767 761 758 760 751 756 Home Equity: 2022 YTD 2021
Slide 41: Stable, Diversified Sources of Wholesale Funds
Stable, Diversified Sources of Wholesale Funds Historical issuance, smooth runoff profile and optimization of funding costs Wholesale Funding Issuances and Maturities Quarterly Wholesale Maturities through 2025 ($ in billions) ($ in billions) HoldCo Sr $0.5 Bank Sr 2021 $0.5 Bank Sub $0.5 HoldCo Sub
Slide 42: Balance Sheet Management
Balance Sheet Management Asset Sensitivity (+100 bp ramp) NII at risk +100 3.1% 0.4% 3.0% (0.3%) (0.3%) Balance Explicit Rate curve sheet mix hedging actions driving higher NII 1Q22 Hedging Higher Base Mix and 2Q22 Income Other Loan Portfolio Composition at 6/30/2022 Fixed Variable 34% (<=1month) 44
Slide 43: Change in Common Shares Outstanding
Change in Common Shares Outstanding Share count in millions 2Q22 1Q22 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 Beginning shares outstanding 1,439 1,438 1,446 1,477 1,018 1,017 1,017 1,017 Employee equity compensation 4 1 1 3 0 1 ‐ ‐ Share repurchases ‐ ‐ (10) (33) ‐ ‐ 0 ‐ TCF Acquisition ‐ ‐ ‐ ‐ 458 ‐ ‐ ‐ Endi
Slide 44: Capital Protection
Capital Protection Top quartile ranking relative to peer group; TCE + ACL to tangible assets 1Q 2022 (TCE + ACL) / TA Ratio Peer Median 7.01% 8.95% 1.01% 7.90% 7.51% 7.49% 7.47% 7.17% 1.02% 1.23% 1.01% 0.70% 6.86% 6.82% 6.65% 0.98% 6.38% 1.06% 0.94% 0.71% 5.94% 0.86% 0.57% 7.94% 6.88% 6.48% 6.77% 6.
Slide 45: Credit Quality
Credit Quality (4) Huntington Welcome: : JOC ATX
Slide 46: Commercial Credit Quality Review
Commercial Credit Quality Review Commercial and Industrial: 2Q22 1Q22 4Q21 3Q21 2Q21 Period end balance(1) ($ in billions) $43.4 $42.2 $41.7 $40.4 $41.9 30+ days PD and accruing 0.33% 0.17% 0.30% 0.18% 0.18% 90+ days PD and accruing 0.03% 0.02% 0.03% 0.02% 0.00% NCOs (annualized) ‐0.04% ‐0.22% 0.06%
Slide 47: Consumer Credit Quality Review
Consumer Credit Quality Review Home Equity: 2Q22 1Q22 4Q21 3Q21 2Q21 Period end balance ($ in billions) $10.4 $10.3 $10.6 $10.9 $11.3 30+ days PD and accruing 0.68% 0.62% 0.89% 0.57% 0.55% 90+ days PD and accruing 0.12% 0.11% 0.16% 0.09% 0.08% NCOs (annualized) ‐0.08% ‐0.03% ‐0.04% ‐0.08% ‐0.08% NAL
Slide 48: Consumer Credit Quality Review, continued
Consumer Credit Quality Review, continued Automobile: 2Q22 1Q22 4Q21 3Q21 2Q21 Period end balance ($ in billions) $13.6 $13.5 $13.4 $13.3 $13.2 30+ days PD and accruing 0.78% 0.66% 0.76% 0.59% 0.52% 90+ days PD and accruing 0.05% 0.04% 0.05% 0.04% 0.03% NCOs (annualized) 0.00% 0.01% ‐0.03% ‐0.10% ‐0
Slide 49: Delinquencies
Delinquencies Commercial (30+ Days(1)) Commercial (90+ Days(1)) 0.39% 0.33% 0.32% 0.30% 0.26% 0.19% 2Q22 includes $92.2 0.15% 0.15% 0.12% million of matured PPP loans. Excluding these, 0.04% 0.04% ratio would be 0.24% 0.03% 0.03% 0.03% 0.02% 0.02% 0.02% 0.02% 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22
Slide 50: Criticized Commercial Loan Analysis
Criticized Commercial Loan Analysis End of Period ($ in millions) 2Q22 1Q22 4Q21 3Q21 2Q21 Criticized beginning‐of‐period $4,385 $4,711 $4,540 $4,488 $2,871 TCF Additions (Net) 0 0 0 0 1,745 Additions / increases 824 727 1,019 1,046 405 Advances 224 162 552 107 108 Upgrades to “Pass” (527) (512) (53
Slide 51: Notes
Notes Slide 5: (1) For J.D. Power 2022 award information, visit jdpower.com/awards Slide 6: (1) Peers: BBT, CIT, CMA, CFG, FITB, KEY, MTB, PNC, RF, TFC, USB, ZION (2) Peers: CFG, FITB, KEY, MTB, PNC, RF, TFC, USB Slide 12: (1) Disclosed PPP impact only refers to legacy Huntington PPP. Legacy TCF PPP
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