Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q3 2022 Earnings Presentation
47 slides from Huntington Bancshares's earnings presentation, Oct 21, 2022
Slide 1: 2022 Third Quarter Earnings Review
2022 Third Quarter Earnings Review October 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 Delivered third consecutive quarter of record PPNR supported by higher net 1 interest income, fee income, and execution on strategic growth initiatives Average deposits grew modestly, led by commercial; continued disciplined 2 deposit pricing Broad-based loan growth of 10% annualized—ro
Slide 5: 2022 Third Quarter Strategic Highlights
2022 Third Quarter Strategic Highlights Executed on strategic priorities driving profitable growth and record net income Diluted Earnings Per Common Share Return on Tangible Common Equity (ROTCE) EPS GAAP Adjusted EPS ROTCE (GAAP) Adjusted ROTCE 20.6% 22.2% $0.39 17.9% 18.2% 17.1% $0.35 $0.36 $0.36
Slide 6: Revenue Synergy Opportunities
Revenue Synergy Opportunities Leveraging expertise and capabilities to expand and deepen relationships Revenue Synergy Area The Opportunity Where are we now • Expanded markets and increased capacity and scale • Growth in average loans and 1 Middle Market, Corporate and • Deepening via enhanced treas
Slide 7: 2022 Third Quarter Financial Performance
2022 Third Quarter Financial Performance Robust PPNR, solid loan growth, NIM expansion, excellent credit quality EPS ROTCE Efficiency Ratio GAAP Reported $0.39 21.9% 54.4% Adjusted $0.39 22.2% (18.6% ex AOCI) 53.9% Total average loans +$3.0 billion, or +2.6% QoQ (loans ex-PPP +$3.3 billion, or +2.
Slide 8: Pre-Provision Net Revenue
Pre-Provision Net Revenue C Record PPNR; 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 $ in millions
Slide 9: Loans and Leases
Loans and Leases Broad-based loan growth led by C&I and residential real estate Total Loan and Lease Balances Highlights Average Balances vs Linked Quarter $117.0 Total loans increased $3.0 billion (+2.6%) QoQ, or $111.1 $113.9 $109.7 $109.5 $3.3 billion (+2.9%) ex PPP $0.5 QoQ YoY $3.3 $1.0 $0.2
Slide 10: Deposits
Deposits Deposit balances higher led by commercial with focus on growing primary bank relationships Total Deposits Average Balances Period-end $142.3 $142.3 $142.9 $145.0 $146.0 $145.4 $146.3 QoQ YoY $4.5 $4.3 $3.8 $3.2 $4.3 Core $61.4 $62.1 $61.8 $63.9 $65.3 2.1% 6.3% Commercial $76.4 $77.4 $77.9 $
Slide 11: Net Interest Income
Net Interest Income C Net interest income expansion driven by higher NIM and average loans Net Interest Income (FTE) Highlights $ in millions Net Interest Income, ex PAA and PPP vs Linked Quarter Paycheck Protection Program (PPP) Net interest income increased $145 million (+11%) $1, 600.0 0 Purcha
Slide 12: Stable Core Deposit Base
Stable Core Deposit Base C Positioned well for rising rate environment Deposit Cost vs Fed Funds Target Rate Current 3Q15-2Q19 Tightening Fed Cycle (+225) 2Q19-4Q21 Easing Fed Cycle (-225) Cycle 3.25 2.50 2.50 2.25 2.00 2.00 1.75 1.75 1.75 1.50 1.25 1.00 0.75 0.70 0.73 0.75 0.66 0.50 0.44 0.55 0.64
Slide 13: Balance Sheet Management
Balance Sheet Management Dynamic hedging strategy; maintaining asset sensitivity while managing downside rate risk Comprehensive Balance Sheet Management Strategy Proactive management to protect net interest Securities portfolio positioned to capitalize on income while benefitting from rising rates
Slide 14: Noninterest Income
Noninterest Income Growth in capital markets, offset by mortgage banking and deposit service charges Noninterest Income Highlights vs Linked Quarter $535 $515 Capital markets higher $19 million, or 35%, reflecting the $499 $498 $485 full quarter impact from Capstone Other noninterest income incr
Slide 15: Noninterest Expense
Noninterest Expense Prudent expense management with investments in revenue producing initiatives Noninterest Expense Highlights $1,289 vs Linked Quarter $1,221 $234 Noninterest expense of $1,053 million, increased $35 $187 $1,053 $1,018 $1,053 million or 3.4% $46 $24 $10 Adjusted noninterest exp
Slide 16: 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 with our medium-term 9 – 10% target operating range of 9% to 10% 9.6% D
Slide 17: 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 $2,205 $2,107 $2,168 $2,230 0.20% $2,109 0.15% 0.12% 0.07% 2.01% 0.03% 1.89% 1.89% 1.87%
Slide 18: 2022 Outlook
2022 Outlook Robust PPNR expansion driven by revenue and loan growth 4Q22 vs. 4Q21 Commentary Prior Guidance Updated Guidance As of 9/12/22 As of 10/21/22 Average Loans (ex-PPP) Commercial led, with contribution from Non-GAAP Up high single digits Up high single digits (%) 4Q21 baseline = $107.5 bil
Slide 19: Uniquely Positioned to Drive Substantial Value Creation
Uniquely Positioned to Drive Substantial Value Creation People-First, Digitally-Powered with best-in-class capabilities Top regional bank with scale and leading market density Powerful Strength in 11-state footprint and select national commercial & consumer franchises Franchise Market-leadin
Slide 20: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-Provision Net Revenue (PPNR) Pre-Provision Net Revenue YTD22 2017 2018 2019 2020 2021 4Q21 1Q22 2Q22 3Q22 ($ in millions) Annualized Total revenue $4,309 $4,510 $4,667 $4,815 $5,991 $1,647 $1,645 $1,746 $1,902 $7,057 FTE adjustment 50 30 26 21 25 6 8 6 8 29 Total revenue
Slide 21: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible common equity, ROTCE ($ in millions) 3Q21 4Q21 1Q22 2Q22 3Q22 Average common shareholders’ equity $17,428 $17,193 $16,898 $16,062 $16,150 Less: intangible assets and goodwill 5,577 5,570 5,584 5,613 5,781 Add: net tax effect of intangible assets 55 52 49 46 43 Averag
Slide 22: Non-GAAP Reconciliation
Non-GAAP Reconciliation Noninterest expense, Efficiency Ratio, NIM % Efficiency Ratio ($ in millions) – Pre-tax 3Q21 4Q21 1Q22 2Q22 3Q22 Noninterest expense (GAAP) $1,289 $1,221 $1,053 $1,018 $1,053 Less: intangible amortization 13 14 14 13 13 Noninterest expense less amortization of intangibles (A)
Slide 23: Non-GAAP Reconciliation
Non-GAAP Reconciliation EPS EPS ($ in millions, except per share amounts) 3Q21 4Q21 1Q22 2Q22 3Q22 Earnings Per Share (GAAP), diluted $0.22 $0.26 $0.29 $0.35 $0.39 Acquisition-related expenses $234 $187 $46 $24 $10 Acquisition-related expenses, net of tax $192 $0.13 $139 $0.10 $37 $0.03 $19 $0.01 $8
Slide 24: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible common equity ratio ($ in millions) 3Q21 4Q21 1Q22 2Q22 3Q22 Huntington shareholders’ equity $19,479 $19,297 $18,452 $17,950 $17,136 Less: preferred stock 2,267 2,167 2,167 2,167 2,167 Common shareholders’ equity $17,212 $17,130 $16,285 $15,783 $14,969 Less: goodwill
Slide 25: Appendix
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Slide 26: Basis of Presentation
Basis of Presentation Use of Non-GAAP Financial Measures This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Huntington’s results of operations or financial position. Where non-GAAP financial measures are used, th
Slide 27: Basis of Presentation
Basis of Presentation Rounding Please note that columns of data in this document may not add due to rounding. Notable Items From time to time, revenue, expenses, or taxes are impacted by items judged by management to be outside of ordinary banking activities and/or by items that, while they may be a
Slide 28: Table of Contents
Table of Contents Capstone Revenue Synergies 29 Purchase Accounting Detail 30 Digital Metrics 31 Mortgage Banking Noninterest Income 32 Balance Sheet 33 Balance Sheet Management 34 Wholesale Funding 35 Consumer Originations Detail 36 Shares Outstanding 39 Capital Protection 40 Credit Quality Review
Slide 29: Capstone Revenue Synergies
Capstone Revenue Synergies Leveraging Capstone’s recognized expertise with Huntington’s scale and footprint Complementary deal with existing and new industry verticals, Revenue Synergies accelerating growth and diversifying revenue 1 Leverage the power and depth of Huntington relationships to acce
Slide 30: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Projected ($ in millions) 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Loans and Leases $25 $20 $16 $13 $12 $7 $6 $5 $4 Long-term Debt 7 4 4 4 3 3 3 3 3 Deposits 4 1 -- -- -- -- -- -- -- Other (0) 0 (1) (1) 0 (0) (0) 0
Slide 31: 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 3.34 42% 2.42 40% 40% 38% 37% 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22 2Q22 3Q22
Slide 32: Mortgage Banking Noninterest Income Summary
Mortgage Banking Noninterest Income Summary $100 Mortgage Banking Income (MBI) Salable Production Mix $81 $80 $84 18% 11% $61 $1 $49 $60 49% 52% 48% $60 $4 $44 $40 $45 $10 $26 3.27% $34 $33 89% $20 82% 2.38% 2.45% 2.02% 1.71% 51% 48% 52% $- $(3) $(7) $(20) 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22 2Q2
Slide 33: Balance Sheet
Balance Sheet (2) Huntington Welcome: exe
Slide 34: Balance Sheet Management
Balance Sheet Management Asset Sensitivity (+100 bp ramp) NII at risk +100 3.0% 2.2% 0.5% 0.2% 0.1% Explicit Rate curve Balance hedging driving sheet mix actions higher NII 2Q22 Hedging Higher Base Mix and 3Q22 Income Other Loan Portfolio Composition at 9/30/2022 Fixed 32% Variable (<=1month) 45% In
Slide 35: Stable, Diversified Sources of Wholesale Funds
Stable, Diversified Sources of Wholesale Funds Historical issuance, smooth runoff profile and optimization of funding costs Wholesale Funding Issuances and Maturities Quarterly Wholesale Maturities through 2025 ($ in billions) ($ in billions) Bank Sub HoldCo Sub HoldCo Sr Bank Sr 2021 $0.5 $0.5 ($2.
Slide 36: Automobile – Production Trend
Automobile – Production Trend Originations 3Q22 2Q22 1Q22 4Q21 3Q21 2Q21 1Q21 4Q20 3Q20 Amount ($ in billions) $1.4 $1.8 $1.7 $1.8 $1.8 $1.9 $1.4 $1.4 $1.7 % new vehicles 35% 38% 41% 40% 38% 47% 49% 54% 48% Avg. LTV 84% 84% 84% 84% 85% 84% 87% 86% 89% Avg. FICO 777 778 774 776 772 770 771 774 777 Vi
Slide 37: Vehicle Finance – Origination Trends
Vehicle Finance – Origination Trends Auto Loans: 2022 YTD 2021 2020 2019 2018 2017 2016 2015 Originations ($ in billions) $4.9 $6.9 $5.9 $6.1 $5.8 $6.2 $5.8 $5.2 % new vehicles 38% 43% 47% 46% 47% 50% 49% 48% Avg. LTV(1) 84% 85% 89% 90% 89% 88% 89% 90% Avg. FICO 776 772 775 772 766 767 765 764 Weigh
Slide 38: Residential Mortgage and Home Equity Origination Trends
Residential Mortgage and Home Equity Origination Trends Residential Mortgage: 2022 YTD 2021 2020 2019 2018 2017 2016 2015 Originations ($ in billions) $4.5 $6.6 $4.7 $2.9 $2.9 $2.7 $1.9 $1.5 Avg. LTV 81% 76% 77% 81% 83% 84% 84% 83% Avg. FICO 765 768 767 761 758 760 751 756 Home Equity: 2022 YTD 2021
Slide 39: Change in Common Shares Outstanding
Change in Common Shares Outstanding Share count in millions 3Q22 2Q22 1Q22 4Q21 3Q21 2Q21 1Q21 4Q20 Beginning shares outstanding 1,443 1,439 1,438 1,446 1,477 1,018 1,017 1,017 Employee equity compensation 0 4 1 1 3 0 1 - Share repurchases - - - (10) (33) - - 0 TCF Acquisition - - - - - 458 - - Endi
Slide 40: Capital Protection
Capital Protection Top quartile ranking relative to peer group; TCE + ACL to tangible assets 2Q22 (TCE + ACL) / TA Ratio Peer Median 6.68% 8.63% 0.93% 7.40% 7.05% 6.96% 6.91% 6.69% 6.67% 0.98% 6.39% 0.71% 6.00% 5.94% 1.25% 1.09% 0.97% 0.98% 1.08% 5.44% 0.86% 0.69% 0.63% 7.70% 6.42% 6.26% 5.80% 5.82%
Slide 41: Credit Quality
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Slide 42: Commercial Credit Quality Review
Commercial Credit Quality Review Commercial and Industrial: 3Q22 2Q22 1Q22 4Q21 3Q21 Period end balance(1) ($ in billions) $44.1 $43.4 $42.2 $41.7 $40.4 30+ days PD and accruing 0.33% 0.33% 0.17% 0.30% 0.18% 90+ days PD and accruing 0.07% 0.03% 0.02% 0.03% 0.02% NCOs (annualized) 0.15% -0.04% -0.22%
Slide 43: Consumer Credit Quality Review
Consumer Credit Quality Review Home Equity: 3Q22 2Q22 1Q22 4Q21 3Q21 Period end balance ($ in billions) $10.4 $10.4 $10.3 $10.6 $10.9 30+ days PD and accruing 0.71% 0.68% 0.62% 0.89% 0.57% 90+ days PD and accruing 0.11% 0.12% 0.11% 0.16% 0.09% NCOs (annualized) -0.07% -0.08% -0.03% -0.04% -0.08% NAL
Slide 44: Consumer Credit Quality Review, continued
Consumer Credit Quality Review, continued Automobile: 3Q22 2Q22 1Q22 4Q21 3Q21 Period end balance ($ in billions) $13.4 $13.6 $13.5 $13.4 $13.3 30+ days PD and accruing 0.71% 0.78% 0.66% 0.76% 0.59% 90+ days PD and accruing 0.05% 0.05% 0.04% 0.05% 0.04% NCOs (annualized) 0.07% 0.00% 0.01% -0.03% -0.
Slide 45: Delinquencies
Delinquencies Commercial (30+ Days(1)) Commercial (90+ Days(1)) 0.43% 0.39% 0.33% 0.32% 0.30% 0.26% 0.19% 0.07% 0.15% 3Q22 and 2Q22 includes $95M and 0.12% $92M of matured PPP loans, 0.04% 0.04% respectively. Excluding these, ratio would 0.03% 0.03% 0.02% 0.02% 0.02% 0.02% be 0.29% in 3Q22 and 0.24%
Slide 46: Criticized Commercial Loan Analysis
Criticized Commercial Loan Analysis End of Period ($ in millions) 3Q22 2Q22 1Q22 4Q21 3Q21 Criticized beginning-of-period $4,206 $4,385 $4,711 $4,540 $4,488 Additions / increases 734 824 727 1,019 1,046 Advances 248 224 162 552 107 Upgrades to “Pass” (666) (527) (512) (539) (532) Paydowns (652) (692
Slide 47: Notes
Notes Slide 6: (1) Asset finance includes equipment finance and distribution finance (formerly called inventory finance) Slide 11: (1) Disclosed PPP impact only refers to legacy Huntington PPP. Legacy TCF PPP deferred fees were zeroed out as part of the purchase accounting process, and all TCF PPP l
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