Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q3 2023 Earnings Presentation
61 slides from Huntington Bancshares's earnings presentation, Nov 8, 2023
Slide 1: 2023 Fourth Quarter Investor Presentation
Welcome.® 2023 Fourth Quarter Investor Presentation November 8, 2023 The Huntington National Bank is Member FDIC. ®, Huntington® and Huntington. Welcome.® are federally registered service marks of Huntington Bancshares Incorporated. ©2023 Huntington Bancshares Incorporated.
Slide 2: Disclaimer
Disclaimer CAUTION REGARDING FORWARD-LOOKING STATEMENTS The information contained or incorporated by reference in this presentation contains certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical fa
Slide 3: Table of Contents
Table of Contents Huntington Overview 3 Noninterest Expense 38 Segment Overview 11 Expense Initiatives 39 Commercial Banking Overview 12 Capital Positioning 40 Capital Markets 14 CET1 Comparison 41 Consumer & Regional Banking Overview 15 Tangible Book Value 42 Growing Primary Relationships 16 Asset
Slide 4: Overview
Overview (2) Huntington Welcome:
Slide 5: Huntington: A Purpose-Driven Company
Huntington: A Purpose-Driven Company OUR PURPOSE OUR VISION We make people’s lives To be the leading better, help businesses People-First, thrive, and strengthen the Digitally Powered Bank communities we serve Purpose and Vision Linked to Business Strategies Guided by Through-the-Cycle Aggregate Mod
Slide 6: Leading Midwest Regional Bank with Scaled, National Businesses
Leading Midwest Regional Bank with Scaled, National Businesses Compelling Results $187B $149B $121B Assets Deposits Loans and Leases ✓ Top 20 U.S. Bank by Deposits Established Market Leadership ✓ Top-tier total loss absorbing capacity with 11.8% CET1 (Reported and Adjusted for ACL) Industry Leading
Slide 7: Winning with Differentiation
Winning with Differentiation Technology & Growth Culture Brand Opportunities Innovation • Top-tier Talent • Trust and NPS • Award Winning Digital • Strategic Growth Initiatives • Colleagues are • Local Model • Continuous Launch of our Brand Disruptive Products • TCF Revenue Synergies • Expertise and
Slide 8: Leading Brand is a Key Source of Competitive Strength
Leading Brand is a Key Source of Competitive Strength #1 Trust(1) #1 NPS (1) #1 Satisfaction(1) Trustworthiness Net Promoter Score Overall Customer Satisfaction HBAN HBAN HBAN Bank 1 Bank 1 Bank 2 Bank 2 Bank 3 Bank 1 Bank 3 Bank 5 Bank 5 Bank 4 Bank 2 Bank 3 Bank 5 Bank 4 Bank 6 Bank 6 Bank 7 Bank
Slide 9: Well Positioned to Thrive and Manage Through the Dynamic Environment
Well Positioned to Thrive and Manage Through the Dynamic Environment Adj. CET1(1) HBAN Expanding adjusted CET1 through YE24 8.0% 8.0% Adj. CET1 Top Quartile Peers (2Q) 6.9% Top Quartile vs peers Optimizing balance sheet to generate the Capital highest returns Deposit Growth since 4Q21(2) 70% Ins
Slide 10: Execution Driving Financial Outperformance Versus Peers
Execution Driving Financial Outperformance Versus Peers % Insured Deposits CET1 + ACL NCO Adjusted ROTCE ex AOCI Peers at 2Q23(1) 3Q23(1) Since 4Q21(1) 3Q23(1) HBAN 70% Peer 6 Peer 7 Peer 5 Peer 1 HBAN 11.8% Peer 10 Peer 3 Top Quartile Peer 5 Peer 7 HBAN 0.14% HBAN 15.3% Peer 10 Peer 9 Peer 8 Peer 1
Slide 11: Segment Overview
Segment Overview (2) Huntington Welcome:
Slide 12: Commercial Bank | Serving the Needs of Businesses and Institutions Across the Nation
Commercial Bank | Serving the Needs of Businesses and Institutions Across the Nation $62B $68B $1.0B …With Significant Scale and Reach Deposits Loans Net Income(1) HBAN CML Relationships Proven Commercial Optimization and Growth... Where We Were (2010) Where We Are (2023) • Community bank, regionall
Slide 13: Achieving Scale Across Diverse Set of Commercial Solutions
Achieving Scale Across Diverse Set of Commercial Solutions Middle Capital Market Markets Focused on High Growth, High Return Businesses Returns Commercial Corporate Real Estate Commercial and Specialty High Banking Treasury Capital Banking Management Markets Middle Market Asset Corporate Asset Finan
Slide 14: Capital Markets: Executing Through Volatile Environment
Capital Markets: Executing Through Volatile Environment Capital Markets Fees Balanced Revenue Mix(1) $ in millions $252 $248 Customer Risk Advisory / M&A Management 34% 31% $151 $123 $125 $108 $90 2017 2018 2019 2020 2021 2022 LTM Debt & Equity Sales & Trading 16% Capital Markets 19% Capital Markets
Slide 15: Consumer & Regional Banking
Consumer & Regional Banking …With Established Scale and Scope $107B $66B $1.2B (1) $27B Deposits Consumer & Business Loans Fee Revenue AUM #1 17% Growth in Leading Midwest Consumer and National Specialty Franchises Branch Share in Ohio and Wealth Advisory Relationships Michigan YoY 3.2M 4.3M 379K Co
Slide 16: Growing Primary Relationships Supports Core Deposit Base
Growing Primary Relationships Supports Core Deposit Base Culture of product innovation with a proven track record and a leading brand that consumers trust Strong Acquisition Growth Primary Relationships Earned through Product Innovation through Customer Focus Huntington “Fair Play Banking” and Past
Slide 17: Growing Our Local Advantage through an Enhanced Regional Banking Model
Growing Our Local Advantage through an Enhanced Regional Banking Model 2023 Regional Banking Enhancements Regional Banking Model brings localized delivery and service differentiation, building on Strong Regional P&L accountability Local Advantage in existing geographies Eliminated dotted Aligned lea
Slide 18: Clear Path to Deliver Sustainable Revenue Growth
Clear Path to Deliver Sustainable Revenue Growth Illustrative Contribution of Medium-Term Revenue Growth Vehicle Finance Wealth Mgmt Deliver superior Payments credit performance Business Increasing BusinessBanking Banking through the cycle, Grow share of penetration through Unified utilizing technol
Slide 19: Financial Update
Financial Update (2) Huntington Welcome:
Slide 20: 2023 Third Quarter Financial Performance
2023 Third Quarter Financial Performance Key Metrics Highlights GAAP EPS of $0.35; adjusted EPS of $0.36 excluding Notable Items: EPS $0.35 $0.36 Adjusted $0.01 Notable Items from expenses related to staffing GAAP efficiencies and corporate real estate consolidations Sustained momentum in core
Slide 21: Driving Sustained Profitability
Driving Sustained Profitability Pre-Provision Net Revenue (PPNR) PPNR (GAAP) PPNR (Adjusted for Notable Items) $857 $867 $893 $908 $844 $828 $802 $807 $798 $813 3Q22 4Q22 1Q23 2Q23 3Q23 Return on Tangible Common Equity % Notable Items ROTCE (GAAP) Adj. ROTCE ex AOCI 26.5% 22.2% 22.7% 26.0% 20.0% 23.
Slide 22: Loans and Leases | Loan Growth Optimized for Return
Loans and Leases | Loan Growth Optimized for Return Commercial Average Loan and Lease Balances Highlights vs Linked Quarter +4.4% $68.7 Average balances decreased $1.2 billion, $67.9 $67.5 $66.4 or -1.8% QoQ $64.7 vs Prior Year Average balances increased $2.8 billion, or 4.4% YoY 3Q22 4Q22 1Q23
Slide 23: Loans and Leases | Loan Growth Optimized for Return
Loans and Leases | Loan Growth Optimized for Return Average Loan and Lease Balances Highlights vs Linked Quarter +3.3% Average balances down $0.6 billion, or -0.5%, QoQ $120.4 $121.3 $120.8 driven by lower commercial loan balances due to $117.0 $118.9 seasonality and optimization efforts, partiall
Slide 24: Loan Yields | Benefitting From Fixed Rate Re-Pricing
Loan Yields | Benefitting From Fixed Rate Re-Pricing Loan Portfolio Composition (as of 3Q23) Highlights Balance sheet positioned to benefit from asset sensitivity and higher interest rates Fixed Both variable rate and short-term loan portfolios benefited from 31% Variable asset repricing 48% A
Slide 25: Sustained Deposit Growth
Sustained Deposit Growth +1.5% ADB +1.8% EOP $148.0 $148.2 $148.9 $147.9 $146.0 $146.3 $145.7 $146.1 $145.6 $145.3 0.25% 0.64% 1.13% 1.57% 1.91% 3Q22 4Q22 1Q23 2Q23 3Q23 ADB EOP Total cost of deposits Note: $ in billions unless otherwise noted 2023 Fourth Quarter Investor Presentation 25
Slide 26: Deposits | Continued Sequential Growth
Deposits | Continued Sequential Growth Deposit Balance Trend Highlights End of Period Monthly Averages vs Linked Quarter Total $148.0 $148.9 $147.4 $148.2 $148.8 Ending total deposits increased $0.9 billion, $145.3 $144.9 $145.1 $146.7 or 0.6% Core deposit balances represented nearly all net dep
Slide 27: Non-Interest Bearing (NIB) Deposit Mix
Non-Interest Bearing (NIB) Deposit Mix Total Deposits – Ending Balances Pre-TCF Acquisition $143 $142 $143 $147 $145 $146 $148 $145 $148 $149 Total Deposits $94 $95 $99 $102 $82 $81 $82 $82 $87 Interest Bearing 31.7% 31.4% 30.2% 29.8% 29.0% 30.6% 27.9% 25.9% 25.3% 22.5% 21.3% Non-Interest Bearing 24
Slide 28: High Quality, Granular Deposit Franchise
High Quality, Granular Deposit Franchise Leading Percent of Insured Deposits(1) Diversification by Business Lines.. Banks at 2Q23 HBAN 70% Consumer Bank 1 63% As of 1Q23 BAC 63% 51% Bank 2 60% 25% Commercial Bank 3 59% C 59% Bank 4 59% 4% 13% Bank 5 6% 58% Other Business Banking 1% Bank 6 58% Vehicl
Slide 29: Cumulative Deposit Growth Above Peers
Cumulative Deposit Growth Above Peers Cumulative Growth Rate of Average Deposits since 4Q21 HBAN Peer Median (1) Top / Bottom Quartile(1) 4.1% 2.6% 2.4% 2.7% 2.3% 1.9% 0.4% 0.2% -1.4% -4.5% -3.9% -6.7% -5.0% -6.0% 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Consistently Grown Deposits Despite More Chall
Slide 30: Commercial Deposit Relationships Bolstered by Off Balance Sheet Liquidity Management Solutions
Commercial Deposit Relationships Bolstered by Off Balance Sheet Liquidity Management Solutions Commercial Off B/S Overview Total Commercial Banking Segment Liquidity (Average) 2019: Enhanced off B/S liquidity Annually $60.0 YoY $58.1 solutions for commercial customers $55.1 $56.9 $52.2 Total +15% $4
Slide 31: Diversified Sources of Liquidity
Diversified Sources of Liquidity Robust Level of Available Liquidity(1) Highlights $ in billions Peer leading available liquidity as a percent of $88 $91 uninsured deposits highlighting the proactive $11 $11 Cash approach to liquidity risk management and $61 strength of our granular deposit base $
Slide 32: Net Interest Income | Driving Growth Over Time
Net Interest Income | Driving Growth Over Time Net Interest Income (FTE)(1) Net Interest Income, ex PAA and PPP Purchase Accounting Accretion (PAA) & 8.7% CAGR Paycheck Protection Program (PPP) (3Q21-3Q23) $1,412 $1,471 $1,418 $1,357 $1,379 $1,267 $20 $12 $10 $8 $6 $1,167 $1, 400.0 0 $1,138 $1,154 $
Slide 33: Deposit Costs | Continued Disciplined Execution
Deposit Costs | Continued Disciplined Execution Deposit Cost vs Fed Funds Target Rate Current 3Q15-2Q19 Tightening Fed Cycle (+225) 2Q19-4Q21 Easing Fed Cycle (-225) Cycle 5.25 5.50 5.00 4.50 3.25 2.50 2.50 2.00 2.25 2.00 1.75 1.91 1.75 1.75 1.57 1.50 1.25 0.500.17 0.160.50 0.75 1.00 0.44 0.55 0.64
Slide 34: Balance Sheet Management Strategy
Balance Sheet Management Strategy Hedging Program Overview Weighted Notional WAL Program Avg Rate Description 3Q23 Actions ($) (Years) (%) Capital Protection: PF Swaps $11.7 1.48 3.76 Protects capital if rates increase No material actions Designed to protect capital against Economic Hedges: 6-month/
Slide 35: Securities Portfolio
Securities Portfolio Average Securities + Cash(1) Highlights Average Securities Cash EOP $54.4 Securities duration 4.5 years; net of hedging 3.6 years $49.6 $50.8 $52.0 $50.3 $47.5 $47.3 Strategically lowered portfolio duration since 2021 $7.7 $12.7 $10.8 $11.1 $4.9 $6.3 $11.4 Securities yield
Slide 36: Noninterest Income | Diversified Fee Revenues
Noninterest Income | Diversified Fee Revenues Noninterest Income Highlights Noninterest Income Notable Items MTM-PF Swaptions vs Linked Quarter excl. Notable Items & MTM PF Swaptions Noninterest income increased $14 million QoQ driven by $498 $499 $512 $495 $509 positive MTM on PF swaptions as wel
Slide 37: Strategic Fee Focus Areas | Continued Momentum in Fees
Strategic Fee Focus Areas | Continued Momentum in Fees Capital Markets Fees Balanced Revenue Mix(1) Advisory / Customer Risk Building incremental product capabilities M&A Management 34% 31% Bolstered by Capstone to drive synergies in Capital the core business Markets Challenging operating envi
Slide 38: Noninterest Expense | Disciplined Expense Management
Noninterest Expense | Disciplined Expense Management Noninterest Expense (NIE) Highlights vs Linked Quarter $1,077 $1,086 $1,090 Reported NIE increased $40 million QoQ $1,053 $1,050 $15 $15 million of Notable Items includes expenses related to $10 $42 $15 staffing efficiencies and corporate real
Slide 39: Strategic Expense Initiatives Will Drive Efficiency
Strategic Expense Initiatives Will Drive Efficiency 1H23 Actions 2H23 Actions Operation Accelerate Branch Consolidations ✓ Simplifying customer journeys ✓ Consolidating 34 locations primarily in 1Q24 ✓ Improve ease of transacting Branch Optimization Staffing Efficiencies ✓ Consolidated 31 locations
Slide 40: Capital Positioning | Building Over the Year
Capital Positioning | Building Over the Year Common Equity Tier 1 (CET1) Ratio Highlights Target operating range 9 – 10% Strong Capital Position CET1 continues to grow on a reported basis (+28 bps QoQ) 10.10% Inclusive of AOCI, CET1 declined QoQ (-12 bps) driven by 9.82% movement of rates 9.55%
Slide 41: CET1 Comparison versus Peers
CET1 Comparison versus Peers CET1 (Reported and Adjusted for ACL) Peer at 3Q23 12.3% 11.8% 11.7% 11.7% 11.6% 11.3% 11.3% 11.3% 11.1% 11.0% 1.4% 11.0% CET1 + ACL 1.7% 0.9% 1.3% 1.3% 1.7% 1.1% 1.5% 1.3% 1.2% 1.2% ACL Impact 10.9% 10.8% 10.4% 10.3% 10.1% 9.7% 10.2% 9.8% 9.8% 9.9% 9.8% CET1 Reported Pee
Slide 42: Tangible Book Value (TBV) per Share
Tangible Book value (TBV) per Share Tangible Book Value per Share TBVPS Adjusted TBVPS, ex AOCI $9.63 $9.40 $9.23 $8.96 $8.67 $7.32 $7.33 $7.12 $6.82 $6.40 3Q22 4Q22 1Q23 2Q23 3Q23 See reconciliation on Slide 59 (TBV per Share) 2023 Fourth Quarter Investor Presentation 42
Slide 43: Asset Quality and Reserve | Top Tier Reserve Profile
Asset Quality and Reserve | Top Tier Reserve Profile Net Charge-off Ratio Allowance for Credit Losses (ACL) Through the Cycle Target NCO Range (25 – 45 bps) HBAN Peer Median 2.17% 2.09% 2.01% 1.96% 1.89% 1.87% 1.87% 1.89% 1.90% 1.90% 1.93% 0.32% 1.70% 2.00% 0.28% 0.24% 1.80% 0.20% 0.19% 1.69% 0.15%
Slide 44: Commercial Real Estate (CRE) Overview
Commercial Real Estate (CRE) Overview CRE Loans as % of Total Loans(1) Portfolio Characteristics Peer Median: 15% Peers at 3Q23 Well diversified portfolio with rigorous customer selection Peer 1 9% CRE reserve coverage 3.8% vs peer median of 2%(2) (2Q23) Peer 2 9% Office reserve coverage of >9
Slide 45: Minimal Exposure to Leveraged Lending
Minimal Exposure to Leveraged Lending Loan Portfolio Composition Highlights $3.1 billion, or 2.5% of total loan balances, with a defined All Other portfolio concentration limit 97.5% HNB leveraged defined as: Senior leverage 3.0x, total leverage 4.0x The portfolio is built around our relations
Slide 46: Auto – Proven Track Record of Strategic Growth
Auto – Proven Track Record of Strategic Growth Optimize through the Cycle Know when to pull and press on production to maximize returns Indirect Auto Production ($B) and New Origination Yield $1.9 $1.9 7.1% $1.8 $1.8 $1.8 6.9% $1.7 $1.7 6.3% $1.6 $1.6 $1.6 $1.6 $1.5 5.9% $1.5 $1.4 $1.4 $1.4 $1.4 $1.
Slide 47: Auto – Strong Credit Performance Through the Cycle
Auto – Strong Credit Performance Through the Cycle Key Highlights of Credit Strength Auto % of Total Loans $13.6 $13.4 $13.2 $13.2 $12.8 $12.7 $12.2 $12.5 $12.9 $12.9 Strong Credit Quality $11.0 Auto Loans and % $8.7 $9.5 Industry knowledge and focus on of Total Loans $6.7 18.3% 18.8% 16.4% 17.5%
Slide 48: Medium-Term Financial Targets
Medium-Term Financial Targets PPNR ROTCE Positive Growth Operating 6 – 9% 20%+ Leverage ROTCE ex-AOCI 17% – 19% Adjusted CET1 Ratio: 9 – 10% Operating Net Charge-offs: 25 – 45 bps through the cycle Assumptions Tax Rate: 19 – 21% 2023 Fourth Quarter Investor Presentation 48
Slide 49: 4Q23 Outlook
4Q23 Outlook 4Q23 vs. 3Q23 Guidance Commentary As of 10/20/23 Average Loans Managing balance sheet to support capital accretion Up ~1% 3Q23 Baseline = $120.8 billion and highest return loan growth Average Deposits Up ~1% Acquiring and deepening primary bank relationships 3Q23 Baseline = $148.2 billi
Slide 50: 2024 Management Priorities
2024 Management Priorities Driving continued capital expansion and optimizing asset growth for the highest return opportunities Sustaining deposit momentum with continued focus on acquiring and deepening primary bank customer relationships, delivering disciplined management of deposit betas Co
Slide 51: Appendix
Appendix (2) Huntington Welcome:
Slide 52: Basis of Presentation
Basis of Presentation Use of Non-GAAP Financial Measures This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Huntington’s results of operations or financial position. Where non-GAAP financial measures are used, th
Slide 53: Basis of Presentation
Basis of Presentation Rounding Please note that columns of data in this document may not add due to rounding. Notable Items From time to time, revenue, expenses, or taxes are impacted by items judged by management to be outside of ordinary banking activities and/or by items that, while they may be a
Slide 54: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Projected ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 Loans and Leases $12 $10 $8 $5 $5 $3 $3 $4 $3 Long-term Debt 3 3 3 3 3 3 3 3 3 Deposits -- -- -- -- -- -- -- -- -- Other 0 (2) (1) 0 (2) 0 0 0 0 Su
Slide 55: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-Provision Net Revenue (PPNR), Earnings Per Share (EPS) Pre-Provision Net Revenue 3Q22 4Q22 1Q23 2Q23 3Q23 ($ in millions) Total revenue $1,902 $1,961 $1,921 $1,841 $1,877 FTE adjustment 8 9 9 11 11 Total revenue (FTE) A 1,910 1,970 1,930 1,852 1,888 Less: gain on sale of
Slide 56: Non-GAAP Reconciliation
Non-GAAP Reconciliation Average tangible common equity, ROTCE ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Average common shareholders’ equity $16,150 $15,292 $15,973 $16,359 $16,256 Less: intangible assets and goodwill 5,781 5,771 5,759 5,734 5,722 Add: net tax effect of intangible assets 43 42 40 36 3
Slide 57: Non-GAAP Reconciliation
Non-GAAP Reconciliation Efficiency Ratio, Noninterest Expense Efficiency Ratio ($ in millions) – Pre-tax 3Q22 4Q22 1Q23 2Q23 3Q23 Noninterest expense (GAAP) $1,053 $1,077 $1,086 $1,050 $1,090 Less: intangible amortization 13 13 13 13 12 Noninterest expense less amortization of intangibles (A) $1,040
Slide 58: Non-GAAP Reconciliation
Non-GAAP Reconciliation Net Interest Margin, Common Equity Tier 1 (CET1) Net Interest Margin (%) 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Net Interest Margin (GAAP) 2.91% 2.85% 2.88% 3.15% 3.42% 3.52% 3.40% 3.11% 3.20% Less: Purchase Accounting Accretion (0.09%) (0.06%) (0.05%) (0.04%) (0.04%) (
Slide 59: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible common equity ratio, Tangible book value per share Tangible Common Equity Ratio ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Huntington shareholders’ equity $17,136 $17,731 $18,758 $18,788 $18,483 Less: preferred stock 2,167 2,167 2,484 2,484 2,484 Common shareholders’ e
Slide 60: Notes
Notes Slide 6: (1) For J.D. Power 2023 award information, visit jdpower.com/awards (2) By number (units) of 7(a) loans nationally (3) Since 2010 (4) Bank-owned (5) S&P Global market share data as of 6/30/2023 – Peers include: CFG, CMA, FITB, KEY, MTB, PNC, RF, TFC, USB, ZION (6) Forbes 2022 America’
Slide 61: Notes
Notes Slide 32: (1) 3Q21 - $36M PAA and $46M PPP, 4Q21 - $25M PAA and $29M PPP, 1Q22 - $19M PAA and $17M PPP, 2Q22 - $16M PAA and $7M PPP, 3Q22 - $15M PAA and $5M PPP, 4Q22 - $11M PAA and $1M PPP, 1Q23 - $10M PAA, 2Q23 - $8M PAA, 3Q23 - $6M. Disclosed PPP impact only refers to legacy Huntington PPP.
Huntington Bancshares — Q3 2023 Earnings Presentation on 6ix