Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q2 2023 Earnings Presentation
57 slides from Huntington Bancshares's earnings presentation, Jul 21, 2023
Slide 1: 2023 Second Quarter Earnings Review
Welcome.® 2023 Second Quarter Earnings Review July 21, 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: 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 4: Key Messages
Key Messages Distinguished deposit franchise with sustained core deposit growth driven by 1 acquiring and deepening of primary bank relationships Driving capital (CET1) to high end of target operating range by year end through 2 robust earnings generation and capital optimization Credit continuing t
Slide 5: Huntington – Second Quarter Strategic Highlights
Huntington – Second Quarter Strategic Highlights Position of Strength Strategy Core Business Execution Continued Deposit growth outperformed Acquiring and deepening primary bank relationships Deposit peer median by over 700 bps since 4Q21(1) Growth Optimizing loan growth to generate the highest
Slide 6: 2023 Second Quarter Financial Performance
2023 Second Quarter Financial Performance Key Metrics Highlights Ending total deposits increased QoQ led by consumer EPS $0.35 Average QoQ loan growth led by commercial – Distribution Finance ROTCE 19.9% (GAAP) (15.8% ex AOCI) Best-in-class liquidity coverage of 205% relative to uninsured depo
Slide 7: 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 +6.5% Average balances up $0.9 billion or 0.8% QoQ $118.9 $120.4 $121.3 ▪ Q2 annualized loan growth 3.1% $113.9 $117.0 Average commercial balances up $0.8 billion, or 1.1% QoQ driven
Slide 8: Sustained Deposit Growth
Sustained Deposit Growth +0.4% ADB +1.8% EOP $147.9 $148.0 $146.3 $146.1 $146.0 $145.7 $145.6 $145.4 $145.3 $145.0 0.07% 0.25% 0.64% 1.13% 1.57% 2Q22 3Q22 4Q22 1Q23 2Q23 ADB EOP Total cost of deposits Note: $ in billions unless otherwise noted 2023 Second Quarter Earnings Review 8
Slide 9: Deposits | Continued Quarterly Growth
Deposits | Continued Quarterly Growth Deposit Balance Trend Highlights End of Period Monthly Averages vs Linked Quarter Total $148.0 $146.7 Ending total deposits increased $2.7 billion $145.3 $144.9 $145.1 or 1.9% Monthly average total deposits increased each month this quarter 3/31 6/30 Apr-23
Slide 10: 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 Total Deposits $94 $95 $99 $102 $82 $81 $82 $82 $87 Interest Bearing 29% 29% 29% 31% 32% 31% 30% 30% 29% 28% 26% 23% Non-Interest Bearing 24% 24% 25% 25% 24% 25% 1
Slide 11: 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) & Net Interest $ in millions Paycheck Protection Program (PPP) +7.1% Income CAGR 3Q21-2Q23 $1,412 $1,471 $1,418 $1,357 9.0% $1,267 $20 $12 $1, 400.0 0 $
Slide 12: 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 5.00 5.25 4.50 3.25 2.50 2.50 2.00 2.25 2.00 1.75 1.75 1.75 1.57 1.50 1.00 1.25 0.73 0.75 0.66 0.51 0.50 1.13 0.50 0.25 0.15 0.1
Slide 13: Securities Portfolio
Securities Portfolio Average Securities + Cash(1) Highlights Average Securities Cash EOP Securities duration 4.7 years; net of hedging 3.7 years $54.4 $52.0 $47.8 $47.5 $47.3 $49.6 Securities yields increased 26 bps QoQ $5.2 $7.7 $12.7 $11.1 $4.9 $6.3 No new purchases in the quarter 41% of p
Slide 14: Diversified Sources of Liquidity
Diversified Sources of Liquidity Robust Level of Available Liquidity(1) Highlights $ in billions $88 Peer leading available liquidity as a percent of $11 Cash uninsured deposits highlighting the proactive $61 approach to liquidity risk management and strength of our granular deposit base $10 Conti
Slide 15: Balance Sheet Management Strategy
Balance Sheet Management Strategy Hedging Program Overview(1) Weighted Notional WAL Program Avg Rate Description Q2 Actions ($) (Years) (%) Terminated $0.2 billion, aligned with PF Swaps $11.7 1.48 4.02 Protects capital if rates increase securities portfolio reduction Capital Protection: Designed to
Slide 16: Noninterest Income | Growth in Underlying Key Drivers
Noninterest Income | Growth in Underlying Key Drivers Noninterest Income Highlights vs Linked Quarter $485 $498 $499 $512 $495 Noninterest Income decreased $17 million or 3.3% $57 Noninterest Income ex Notable Items increased $40 million driven by $18 million benefit in Q2 from MTM on PF Swaptio
Slide 17: Noninterest Expense | Disciplined Expense Management
Noninterest Expense | Disciplined Expense Management Noninterest Expense Highlights vs Linked Quarter $1,053 $1,077 $1,086 $1,050 Noninterest expense of $1,050 million, decreased $36 million $1,018 $10 $15 $42 or 3.3% $24 Adjusted noninterest expense, excluding Notable Items increased $6 million
Slide 18: 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 within target operating range at 9.82% 9.82% ▪ CET1 continues to grow on reported basis (+27 bp QoQ) 9.55% ▪ Inclusive of AOCI, CET1 improved 20 bps
Slide 19: 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) $ in millions $2,230 $2,271 $2,299 $2,342 $2,168 0.17% 0.19% 0.16% 0.15% 0.03% 1.87% 1.89% 1.90% 1.90% 1.93% 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22 1Q23 2Q23 ACL ACL as % of Total Loans & Lea
Slide 20: Historical Asset Quality and Reserve Trends
Historical Asset Quality and Reserve Trends Net Charge-off Ratio Key Highlights Through the Cycle Target NCO Range (25 – 45 bps) Strong Credit Quality Credit performance is a reflection of rigorous customer selection 0.32% 0.28% NCOs remain below our through the 0.20% 0.19% 0.15% 0.17% 0.16% cyc
Slide 21: 2023 Outlook
2023 Outlook FY23 vs. FY22 Commentary Prior Guidance Updated Guidance As of 4/20/23 As of 7/21/23 Average Loans Up 5% - 7% Driven mainly by commercial, with modest growth Up 5 - 6% FY22 baseline = $115.3 billion (Lower End) in consumer; reflective of ongoing optimization Average Deposits Consumer le
Slide 22: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-Provision Net Revenue (PPNR) Pre-Provision Net Revenue 2Q22 3Q22 4Q22 1Q23 2Q23 ($ in millions) Total revenue $1,746 $1,902 $1,961 $1,921 $1,841 FTE adjustment 6 8 9 9 11 Total revenue (FTE) A 1,752 1,910 1,970 1,930 1,852 Less: gain on sale of business line -- -- -- 57 -
Slide 23: Non-GAAP Reconciliation
Non-GAAP Reconciliation Average tangible common equity, ROTCE ($ in millions) 2Q22 3Q22 4Q22 1Q23 2Q23 Average common shareholders’ equity $16,062 $16,150 $15,292 $15,973 $16,359 Less: intangible assets and goodwill 5,613 5,781 5,771 5,759 5,734 Add: net tax effect of intangible assets 46 43 42 40 3
Slide 24: Non-GAAP Reconciliation
Non-GAAP Reconciliation Noninterest Expense, Efficiency Ratio Efficiency Ratio ($ in millions) – Pre-tax 2Q22 3Q22 4Q22 1Q23 2Q23 Noninterest expense (GAAP) $1,018 $1,053 $1,077 $1,086 $1,050 Less: intangible amortization 13 13 13 13 13 Noninterest expense less amortization of intangibles (A) $1,005
Slide 25: Non-GAAP Reconciliation
Non-GAAP Reconciliation Net Interest Margin%, Common Equity Tier 1 (CET1) Net Interest Margin (% in percent) 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Net Interest Margin (GAAP) 2.91% 2.85% 2.88% 3.15% 3.42% 3.52% 3.40% 3.11% Purchase Accounting Accretion (0.09%) (0.06%) (0.05%) (0.04%) (0.04%) (0.03%
Slide 26: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible common equity ratio, Tangible book value per share Tangible Common Equity Ratio ($ in millions) 2Q22 3Q22 4Q22 1Q23 2Q23 Huntington shareholders’ equity $17,950 $17,136 $17,731 $18,758 $18,788 Less: preferred stock 2,167 2,167 2,167 2,484 2,484 Common shareholders’ e
Slide 27: Appendix
Appendix 2023 Second Quarter Earnings Review 27
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 Driving Sustained Profitability 31 Credit and Capital 50 Medium-Term Financial Targets 32 CET1 Comparison 51 Purchase Accounting Detail 33 Commercial Credit 52 Digital Metrics 34 Consumer Credit 53 Mortgage Banking Noninterest Income 35 Delinquencies 55 Balance Sheet 36 Criticized
Slide 31: Driving Sustained Profitability
Driving Sustained Profitability Pre-Provision Net Revenue (PPNR) Notable Items & Adjustments Highlights PPNR (GAAP) $908 YoY PPNR growth of 9.3% driven by NII 100 0 $867 $828 $807 expansion, fee growth, and controlled 900 $758 $10 $15 800 $16 expenses 700 $24 $5 600 +9.3% ▪ Adjusted PPNR YoY growt
Slide 32: Medium-Term Financial Targets
Medium-Term Financial Targets PPNR ROTCE Positive Growth Operating 6 – 9% 20%+ Leverage ROTCE ex-AOCI 17% – 19% CET1 Ratio: 9 – 10% Operating Net Charge-offs: 25 – 45 bps through the cycle Assumptions Tax Rate: 19 – 21% 2023 Second Quarter Earnings Review 32
Slide 33: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Projected ($ in millions) 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 Loans and Leases $13 $12 $10 $8 $5 $3 $3 $3 $4 Long-term Debt 4 3 3 3 3 3 3 3 3 Deposits -- -- -- -- -- -- -- -- -- Other (1) 0 (2) (1) 0 0 0 0 0 S
Slide 34: 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 3.28 3.34 3.36 3.44 3.42 43% 42% 37% 38% 36% 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22 1Q23 2Q23 Ave
Slide 35: Mortgage Banking Noninterest Income Summary
Mortgage Banking Noninterest Income Summary Mortgage Banking Income (MBI) Salable Production Mix $100 11% 10% 10% 6% 18% $80 2.02% 1.89% 1.71% 1.75% 1.75% $60 $44 89% 90% 90% 94% $40 $16 $33 82% $26 $25 $26 $11 $20 $1 $9 $10 $28 $25 $22 $16 $16 $- 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22 1Q23 2Q23 MB
Slide 36: Balance Sheet
Balance Sheet 2023 Second Quarter Earnings Review 36
Slide 37: 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 +9.2% Average balances increased $0.8 billion, or $67.9 $68.7 $66.4 1.1% QoQ $64.7 $62.9 vs Prior Year Average balances increased $5.8 billion, or 9.2% YoY 2Q22 3Q22 4Q22 1
Slide 38: Commercial Real Estate (CRE) Overview
Commercial Real Estate (CRE) Overview CRE Loans as % of Total Loans Portfolio Characteristics Peer Median: 15% Peers at 1Q23 Well diversified portfolio with rigorous client selection Peer 1 9% CRE reserve coverage 3% vs peer median of 2% (1Q23) HBAN 11% Office reserve coverage of ~9% Peer 2 11
Slide 39: High Quality, Granular Deposit Franchise
High Quality, Granular Deposit Franchise Leading Percent of Insured Deposits(1) Diversification by Business Lines.. Banks at 1Q23 HBAN 71% Bank 1 66% Consumer As of 1Q23 Bank 2 66% WFC 63% 53% BAC 62% 25% Commercial Bank 3 60% Bank 4 59% Bank 5 57% 15% 4% Bank 6 57% 6% Other Business Banking Bank 7
Slide 40: Balance Sheet Management
Balance Sheet Management Asset Sensitivity (+100 bp ramp) NII at risk +100 2.8% 2.8% vs QoQ remained flat 1Q23 2Q23 Loan Portfolio Composition (as of 2Q23) Fixed 31% Variable (<=1month) 47% Indirect Auto 10% ARMs Other Variable 10% 2% 2023 Second Quarter Earnings Review 40
Slide 41: Stable, Diversified Sources of Wholesale Funds
Stable, Diversified Sources of Wholesale Funds Historical issuance, smooth runoff profile and optimization of funding costs Wholesale Funding Issuances and Maturities Quarterly Wholesale Maturities through 2025 ($ in billions) ($ in billions) HoldCo Sr HoldCo Sub Bank Sr Bank Sub $0.5 $0.5 2021 ($0.
Slide 42: 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 balance sheet liquidity YoY Annually $58.1 solutions for commercial customers $55.1 $56.9 Total +20% $52.
Slide 43: Auto – Production Trend
Auto – Production Trend Originations 2Q23 1Q23 4Q22 3Q22 2Q22 1Q22 4Q21 3Q21 2Q21 Amount ($ in billions) $1.1 $1.5 $1.2 $1.4 $1.8 $1.7 $1.8 $1.8 $1.9 % new vehicles 42% 43% 39% 35% 38% 41% 40% 38% 47% Avg. LTV 87% 87% 85% 84% 84% 84% 84% 85% 84% Avg. FICO 776 781 779 777 778 774 776 772 770 Vintage
Slide 44: Auto – Proven Track Record of Strategic Growth
Auto – Proven Track Record of Strategic Growth Optimize through the Cycle Know when to pull and press on production to maximize returns Indirect Auto Production ($B) and New Origination Yield $1.9 $1.9 6.9% $1.8 $1.8 $1.8 $1.7 $1.7 6.3% $1.6 $1.6 $1.6 $1.6 $1.5 5.9% $1.4 $1.4 $1.4 $1.4 $1.4 $1.4 $1.
Slide 45: 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 $12.2 $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 $6.7 18.3% 18.8% 16.4% 17.5% 16.7%
Slide 46: Vehicle Finance – Origination Trends
Vehicle Finance – Origination Trends Auto Loans: 2023 YTD 2022 2021 2020 2019 2018 2017 2016 Originations ($ in billions) $2.6 $6.1 $6.9 $5.9 $6.1 $5.8 $6.2 $5.8 % new vehicles 42% 38% 43% 47% 46% 47% 50% 49% Avg. LTV(1) 87% 84% 85% 89% 90% 89% 88% 89% Avg. FICO 779 777 772 775 772 766 767 765 Weigh
Slide 47: Residential Mortgage and Home Equity Origination Trends
Residential Mortgage and Home Equity Origination Trends Residential Mortgage: 2023 YTD 2022 2021 2020 2019 2018 2017 2016 Originations ($ in billions) $1.7 $5.4 $6.6 $4.7 $2.9 $2.9 $2.7 $1.9 Avg. LTV 86% 81% 76% 77% 81% 83% 84% 84% Avg. FICO 765 765 768 767 761 758 760 751 Home Equity: 2023 YTD 2022
Slide 48: Change in Common Shares Outstanding
Change in Common Shares Outstanding Share count in millions 2Q23 1Q23 4Q22 3Q22 2Q22 1Q22 4Q21 3Q21 Beginning shares outstanding 1,444 1,443 1,443 1,443 1,439 1,438 1,446 1,477 Employee equity compensation 4 1 0 0 4 1 1 3 Share repurchases - - - - - - (10) (33) Ending shares outstanding 1,448 1,444
Slide 49: Tangible Book Value (TBV) per Share
Tangible Book Value (TBV) per Share Tangible Book Value per Share TBVPS Adjusted TBVPS, ex AOCI $9.40 $9.23 $8.96 $8.67 $8.42 $7.32 $7.33 $6.96 $6.82 $6.40 2Q22 3Q22 4Q22 1Q23 2Q23 See reconciliation on slide 26 (TBV per Share) 2023 Second Quarter Earnings Review 49
Slide 50: Credit and Capital
Credit and Capital 2023 Second Quarter Earnings Review 50
Slide 51: CET1 Comparison versus Peers
CET1 Comparison versus Peers CET1 (Reported and Adjusted for ACL) Peers at 1Q23 11.5% 11.4% 11.3% 11.1% 11.0% 11.0% 10.7% 10.5% 1.7% 1.2% 1.3% 0.9% 10.1% 10.1% 10.0% 1.3% 1.1% 1.5% 1.3% CET1 + ACL 1.0% 1.0% 1.5% ACL Impact 9.8% 10.2% 10.0% 9.8% 9.9% 10.1% 9.3% 9.2% 9.1% 9.1% 8.5% CET1 Reported HBAN
Slide 52: Commercial Credit Quality Review
Commercial Credit Quality Review Commercial and Industrial: 2Q23 1Q23 4Q22 3Q22 2Q22 Period end balance(1) ($ in billions) $49.8 $50.0 $48.1 $46.7 $45.7 30+ days PD and accruing 0.08% 0.09% 0.14% 0.32% 0.32% 90+ days PD and accruing 0.01% 0.02% 0.05% 0.06% 0.02% NCOs (annualized) 0.15% 0.13% 0.08% 0
Slide 53: Consumer Credit Quality Review
Consumer Credit Quality Review Home Equity: 2Q23 1Q23 4Q22 3Q22 2Q22 Period end balance ($ in billions) $10.1 $10.2 $10.4 $10.4 $10.4 30+ days PD and accruing 0.89% 0.86% 0.91% 0.71% 0.68% 90+ days PD and accruing 0.17% 0.17% 0.14% 0.11% 0.12% NCOs (annualized) -0.02% -0.02% -0.04% -0.07% -0.08% NAL
Slide 54: Consumer Credit Quality Review, continued
Consumer Credit Quality Review, continued Automobile: 2Q23 1Q23 4Q22 3Q22 2Q22 Period end balance ($ in billions) $12.8 $13.2 $13.2 $13.4 $13.6 30+ days PD and accruing 0.78% 0.76% 0.89% 0.71% 0.78% 90+ days PD and accruing 0.05% 0.05% 0.07% 0.05% 0.05% NCOs (annualized) 0.10% 0.14% 0.12% 0.07% 0.00
Slide 55: Delinquencies
Delinquencies Commercial (30+ Days(1)) Commercial (90+ Days(1)) 0.43% 0.39% 0.33%0.32% 0.30% 0.26% 0.23% 0.19% 0.07% 0.15% 0.05% 0.12% 0.04% 0.04% 0.03% 0.03% 0.03% 0.03% 0.02% 0.02% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Consumer (30+ Day
Slide 56: Criticized Commercial Loan Analysis
Criticized Commercial Loan Analysis End of Period ($ in millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Criticized beginning-of-period $3,886 $3,700 $3,843 $4,206 $4,385 Additions / increases 851 893 859 735 824 Advances 149 159 167 248 224 Upgrades to “Pass” (448) (323) (484) (666) (527) Paydowns (515) (483) (6
Slide 57: Notes
Notes Slide 5: (1) Source: S&P Global – Includes CMA, FITB, ZION, KEY, PNC, RF, TFC (excludes CFG, USB, and MTB impacted by mergers). Peer Median -4.6% and HBAN +2.7% as of 1Q23 (2) AOCI adjustment aligned to the GSIB reporting requirement - exclusion of AOCI adjusted for cash flow hedges on loan po
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