Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q1 2023 Earnings Presentation
56 slides from Huntington Bancshares's earnings presentation, Apr 20, 2023
Slide 1: 2023 First Quarter Earnings Review
Welcome.® 2023 First Quarter Earnings Review April 20, 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 | Operating with an Aggregate Moderate-to-Low Risk Appetite
Key Messages | Operating with an Aggregate Moderate-to-Low Risk Appetite 1 Diversified, stable deposit base, with the highest percentage of insured deposits(1) 2 Robust liquidity position supported by cash and substantial borrowing capacity 3 Solid and growing capital levels 4 Top tier credit reserv
Slide 5: Huntington – Operating from a Position of Strength
Huntington – Operating from a Position of Strength Strong Foundation Management Approach Industry leading Consumer and Business Bank, and scaled and highly diversified Commercial business • Decade long commitment to Fair Play philosophy, Distinguished #1 Customer #1 SBA Greenwich acquiring and deepe
Slide 6: 2023 First Quarter Financial Performance
2023 First Quarter Financial Performance $0.43 $0.39 ROTCE EPS $0.32 $0.36 $0.38 GAAP Reported 23.1% $0.39 $0.35 $0.39 $0.42 $0.39 $0.29 Adjusted 22.7% (17.8% ex AOCI) $0.38 1Q22 2Q22 3Q22 4Q22 1Q23 EPS GAAP Notable Items Pre-Provision Net Revenue growth of 41% YoY; EPS increased 34% YoY Driving D
Slide 7: Loans and Leases | Broad Based Commercial Loan Growth
Loans and Leases | Broad Based Commercial Loan Growth Average Loan and Lease Balances Highlights QoQ YoY vs Linked Quarter +8.3% Total Average loans up $1.5 billion, or 1.3% QoQ, or $117.0 $118.9 $120.4 1.3% 8.3% $111.1 $113.9 Loans $1.5 billion, or 1.3% ex PPP Average commercial up $1.5 billion
Slide 8: Deposits | Growth in Average Balances
Deposits | Growth in Average Balances Average Deposit Balances QoQ YoY $142.9 $145.0 $146.0 $145.7 $146.1 Total Deposits +0.3% +2.3% $3.8 $3.2 $4.3 $5.0 $5.0 $61.8 $63.9 $65.3 Total Core $65.1 $63.4 -2.6% +2.7% Commercial Total Core $77.3 $77.9 $76.4 $75.6 $77.7 +2.8% +0.4% Consumer 1Q22 2Q22 3Q22 4
Slide 9: High Quality, Granular Deposit Franchise
High Quality, Granular Deposit Franchise Leading Percent of Insured Deposits(1) Diversification by Business Lines.. Banks at 4Q22 HBAN 1Q23 69% HBAN 4Q22 68% Consumer Bank 1As of 1Q23 67% Bank 2 67% 50% WFC 63% 25% Commercial BAC 63% Bank 3 63% Bank 4 58% 14% Bank 5 58% 4% 6% Bank 6 55% Other Busine
Slide 10: Cumulative Deposit Growth Above Peers
Cumulative Deposit Growth Above Peers Cumulative Growth Rate of Average Deposits since 4Q21 (1) HBAN Peer Median (1) Top / Bottom Quartile 2.6% 2.4% 2.3% 2.5% HBAN has consistently 1.9% 2.0% 0.4% grown deposits over the course of last year, 0.3% -1.0% despite a more challenging industry -3.7% -3.7
Slide 11: 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) YoY 2019: Enhanced off balance sheet liquidity solutions for commercial customers Annually $55.8 $57.5 Total +23% $52.9 Pr
Slide 12: 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 $61 uninsured deposits highlighting the proactive $10 approach to liquidity risk management and Cash strength of our granular deposit base As of 4/14,
Slide 13: Net Interest Income | Driving Growth Over Time
Net Interest Income | Driving Growth Over Time Net Interest Income (FTE)(1) Highlights Net Interest Income, ex PAA and PPP Purchase Accounting Accretion (PAA) & vs Linked Quarter $ in millions Paycheck Protection Program (PPP) (2) Net interest income (FTE) decreased $53 million (-3.6%) impacted by
Slide 14: 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 4.75 4.50 3.25 2.50 2.50 2.25 2.00 2.00 1.75 1.75 1.75 1.50 1.25 1.13 1.00 0.50 0.75 0.70 0.73 0.75 0.66 0.64 0.50 0.50 0.31 0.4
Slide 15: Balance Sheet Management Strategy
Balance Sheet Management Strategy Hedging Program Hedging Balance Update (EOP) $ in billions $27.2 Dynamic hedging strategy, designed to create laddered portfolios $24.1 $22.8 with respect to instruments, strikes, and durations $16.2 $17.5 ▪ Two key objectives of: 1) protecting capital over time,
Slide 16: Securities Portfolio
Securities Portfolio Average Securities + Cash(1) Highlights Average Securities Cash Average Securities Yield Securities duration 4.7 years; net of hedging 3.7 years $51.5 $49.6 $47.8 $47.5 $47.3 Securities yields increased 30 bps QoQ $8.8 $4.9 $6.3 $7.7 $5.2 New purchase yield of 5.03%, 14bps
Slide 17: Noninterest Income | Growth in Underlying Key Drivers
Noninterest Income | Growth in Underlying Key Drivers Noninterest Income Highlights vs Linked Quarter $499 $485 $498 $499 $512 Noninterest Income increased $13 million or 3% $57 Noninterest Income ex Notable Items decreased $44 million, impacted by seasonality, lower capital markets, leasing rev
Slide 18: Noninterest Expense | Disciplined Expense Management
Noninterest Expense | Disciplined Expense Management Noninterest Expense Highlights vs Linked Quarter Proactive reduction of expenses with completion of the $1,053 $1,053 $1,077 $1,086 $1,018 voluntary retirement program (VRP), branch consolidations in $46 $10 $15 $42 1Q, and execution of our orga
Slide 19: 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 9.55% ▪ CET1 continues to grow on reported basis (+19 bp QoQ) 9.55% ▪ Inclusive of AOCI, CET1 improved 43 bps QoQ 9
Slide 20: CET1 Comparison versus Peers
CET1 Comparison versus Peers CET1 (Reported and Adjusted for ACL) Peers at 4Q22 Top tier total loss absorbing capacity 11.7% versus peers 11.2% 11.2% 11.0% 10.9% 10.8% 10.7% 10.6% 1.3% 10.4% 10.1% 10.1% CET1 + ACL 1.2% 1.6% 0.8% 9.9% 1.6% 1.3% 1.4% 0.9% 1.2% 1.1% 1.0% 1.5% ACL Impact 10.4% 10.0% 1
Slide 21: 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 $2,168 $2,230 $2,271 $2,299 $2,109 0.17% 0.19% 0.15% 0.07% 0.03% 1.87% 1.87% 1.89% 1.90% 1.90% 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q22 3Q22 4Q22 1Q23 ACL ACL as % of Total Loans & Lea
Slide 22: Commercial Real Estate (CRE) Overview
Commercial Real Estate (CRE) Overview CRE Loans as % of Total Loans Portfolio Characteristics Peer Median: 15% Peers at 4Q22 Well diversified portfolio with rigorous client selection Peer 1 7% Peer 2 11% CRE reserve coverage 3% vs peer median of 2% (4Q22) Peer 3 13% Office reserve coverage of
Slide 23: 2023 Outlook
2023 Outlook FY23 vs. FY22 Commentary Prior Guidance Updated Guidance As of 1/20/23 As of 4/20/23 Average Loans Driven mainly by commercial, with modest growth Up 5% - 7% Up 5% - 7% FY22 baseline = $115.3 billion in consumer Now expect to be consumer led, with continued Average Deposits Up 1% - 4% U
Slide 24: Looking Ahead | Operating from a Position of Strength
Looking Ahead | Operating from a Position of Strength Management Priorities Deposits and ✓ Acquiring and deepening primary bank relationships Liquidity ✓ Ample and growing liquidity Capital ✓ Increasing capital to top end of the range by year end ✓ Operating within our aggregate moderate-to-low risk
Slide 25: Non-GAAP Reconciliation
Non-GAAP Reconciliation Pre-Provision Net Revenue (PPNR) Pre-Provision Net Revenue 1Q22 2Q22 3Q22 4Q22 1Q23 ($ in millions) Total revenue $1,645 $1,746 $1,902 $1,961 $1,921 FTE adjustment 8 6 8 9 9 Total revenue (FTE) A 1,653 1,752 1,910 1,970 1,930 Less: gain on sale of business line -- -- -- -- 57
Slide 26: Non-GAAP Reconciliation
Non-GAAP Reconciliation Average tangible common equity, ROTCE ($ in millions) 1Q22 2Q22 3Q22 4Q22 1Q23 Average common shareholders’ equity $16,898 $16,062 $16,150 $15,292 $15,973 Less: intangible assets and goodwill 5,584 5,613 5,781 5,771 5,759 Add: net tax effect of intangible assets 49 46 43 42 4
Slide 27: Non-GAAP Reconciliation
Non-GAAP Reconciliation Noninterest Expense, Efficiency Ratio, NIM% Efficiency Ratio ($ in millions) – Pre-tax 1Q22 2Q22 3Q22 4Q22 1Q23 Noninterest expense (GAAP) $1,053 $1,018 $1,053 $1,077 $1,086 Less: intangible amortization 14 13 13 13 13 Noninterest expense less amortization of intangibles (A)
Slide 28: Non-GAAP Reconciliation
Non-GAAP Reconciliation Earnings Per Share (EPS), Common Equity Tier 1 (CET1) EPS ($ in millions, except per share amounts) 1Q22 2Q22 3Q22 4Q22 1Q23 Earnings Per Share (GAAP), diluted $0.29 $0.35 $0.39 $0.42 $0.39 Acquisition-related expenses $46 $24 $10 $15 $-- Notable items, net of tax $37 $0.03 $
Slide 29: Non-GAAP Reconciliation
Non-GAAP Reconciliation Tangible common equity ratio, Tangible book value per share Tangible Common Equity Ratio ($ in millions) 1Q22 2Q22 3Q22 4Q22 1Q23 Huntington shareholders’ equity $18,452 $17,950 $17,136 $17,731 $18,758 Less: preferred stock 2,167 2,167 2,167 2,167 2,484 Common shareholders’ e
Slide 30: Appendix
Appendix (2) Huntington Welcome:
Slide 31: 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 32: 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 33: Table of Contents
Table of Contents Driving Sustained Profitability 34 Medium-Term Financial Targets 35 Purchase Accounting Detail 36 Digital Metrics 37 Mortgage Banking Noninterest Income 38 Balance Sheet 39 Balance Sheet Management 40 Wholesale Funding 41 Auto Originations 42 Consumer Originations 45 Shares Outstan
Slide 34: Driving Sustained Profitability
Driving Sustained Profitability Pre-Provision Net Revenue (PPNR) Highlights 100 0 Notable Items PPNR (GAAP) $908 $867 900 $828 Positive underlying trends in NII and fee $758 $10 $15 800 (-$16) income offset by expected seasonality impact 700 $646 $24 600 $46 +41% YoY PPNR growth of 41% driven by
Slide 35: Medium-Term Financial Targets
Medium-Term Financial Targets PPNR ROTCE Positive Growth Operating 6 – 9% 20%+ Leverage ROTCE ex-AOCI 17% – 19% CET1 Ratio: 9 – 10% Operating Net Charge-offs: 25 – 45 bps through the cycle Assumptions Tax Rate: 19 – 21% 2023 First Quarter Earnings Review 35
Slide 36: Impact of Purchase Accounting
Impact of Purchase Accounting Purchase Accounting Accretion (PAA) Summary Actuals Projected ($ in millions) 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Loans and Leases $16 $13 $12 $10 $8 $4 $4 $4 $4 Long-term Debt 4 4 3 3 3 3 3 3 3 Deposits -- -- -- -- -- -- -- -- -- Other (1) (1) 0 (2) (1) 0 0 0
Slide 37: 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 3.26 3.28 3.34 3.36 3.44 43% 42% 40% 38% 37% 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q22 3Q22 4Q22 1Q23 Ave
Slide 38: Mortgage Banking Noninterest Income Summary
Mortgage Banking Noninterest Income Summary Mortgage Banking Income (MBI) Salable Production Mix $100 2.45% 11% 10% 10% 18% $80 2.02% 1.89% 48% 1.71% 1.75% $60 $49 $44 $11 89% 90% 90% $40 $16 82% $26 $25 $26 $1 $10 52% $20 $38 $9 $28 $25 $16 $16 $- 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q22 3Q22 4Q22 1Q23 M
Slide 39: Balance Sheet
Balance Sheet (2) Huntington Welcome:
Slide 40: Balance Sheet Management
Balance Sheet Management Asset Sensitivity (+100 bp ramp) NII at risk +100 0.3% 2.8% 0.5% 2.0% Explicit hedging actions 4Q22 Hedging Mix and 1Q23 Other Loan Portfolio Composition (as of 1Q23) Fixed 31% Variable (<=1month) 47% Indirect Auto 11% ARMs Other Variable 10% 2% 2023 First Quarter Earnings R
Slide 41: Stable, Diversified Sources of Wholesale Funds
Stable, Diversified Sources of Wholesale Funds Historical issuance, smooth runoff profile and optimization of funding costs Wholesale Funding Issuances and Maturities Quarterly Wholesale Maturities through 2025 ($ in billions) ($ in billions) HoldCo Sr HoldCo Sub Bank Sr Bank Sub $0.5 2021 $0.5 ($0.
Slide 42: Auto – Production Trend
Auto – Production Trend Originations 1Q23 4Q22 3Q22 2Q22 1Q22 4Q21 3Q21 2Q21 1Q21 Amount ($ in billions) $1.5 $1.2 $1.4 $1.8 $1.7 $1.8 $1.8 $1.9 $1.4 % new vehicles 43% 39% 35% 38% 41% 40% 38% 47% 49% Avg. LTV 87% 85% 84% 84% 84% 84% 85% 84% 87% Avg. FICO 781 779 777 778 774 776 772 770 771 Vintage
Slide 43: Auto – Proven Track Record of Strategic Growth
Auto – Proven Track Record of Strategic Growth Optimize through the Cycle Know when to pull and press on production to maximize returns Indirect Auto Production ($B) and New Origination Yield $1.9 $1.9 $1.8 $1.8 6.3% $1.8 $1.7 $1.7 5.9% $1.6 $1.6 $1.6 $1.6 $1.5 $1.5 $1.4 $1.4 $1.4 $1.4 $1.4 $1.4 $1.
Slide 44: 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 $12.2 $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 $6.7 18.3% 18.8% 16.4% 17.5% 16.7% 17.1%
Slide 45: Vehicle Finance – Origination Trends
Vehicle Finance – Origination Trends Auto Loans: 2023 YTD 2022 2021 2020 2019 2018 2017 2016 Originations ($ in billions) $1.5 $6.1 $6.9 $5.9 $6.1 $5.8 $6.2 $5.8 % new vehicles 43% 38% 43% 47% 46% 47% 50% 49% Avg. LTV(1) 87% 84% 85% 89% 90% 89% 88% 89% Avg. FICO 781 777 772 775 772 766 767 765 Weigh
Slide 46: Residential Mortgage and Home Equity Origination Trends
Residential Mortgage and Home Equity Origination Trends Residential Mortgage: 2023 YTD 2022 2021 2020 2019 2018 2017 2016 Originations ($ in billions) $0.5 $5.4 $6.6 $4.7 $2.9 $2.9 $2.7 $1.9 Avg. LTV 83% 81% 76% 77% 81% 83% 84% 84% Avg. FICO 764 765 768 767 761 758 760 751 Home Equity: 2023 YTD 2022
Slide 47: Change in Common Shares Outstanding
Change in Common Shares Outstanding Share count in millions 1Q23 4Q22 3Q22 2Q22 1Q22 4Q21 3Q21 2Q21 Beginning shares outstanding 1,443 1,443 1,443 1,439 1,438 1,446 1,477 1,018 Employee equity compensation 1 0 0 4 1 1 3 0 Share repurchases - - - - - (10) (33) - TCF Acquisition - - - - - - - 458 Endi
Slide 48: Tangible Book Value (TBV) per Share
Tangible Book Value (TBV) per Share Tangible Book Value per Share TBVPS Adjusted TBVPS, ex AOCI $9.23 $8.96 $8.67 $8.38 $8.42 $7.47 $7.32 $6.96 $6.82 $6.40 1Q22 2Q22 3Q22 4Q22 1Q23 See reconciliation on slide 29 (TBV per Share) 2023 First Quarter Earnings Review 48
Slide 49: Credit Quality
Credit Quality (2) Huntington Welcome:
Slide 50: Historical Asset Quality and Reserve Trends
Historical Asset Quality and Reserve Trends Net Charge-off Ratio Key Highlights Through the Cycle Target NCO Range (25 – 45 bps) Strong Credit Quality 0.32% 0.28% Credit performance is a reflection of 0.20% rigorous customer selection 0.17% 0.19% 0.15% 0.12% NCOs normalizing from historic low 0.
Slide 51: Commercial Credit Quality Review
Commercial Credit Quality Review Commercial and Industrial: 1Q23 4Q22 3Q22 2Q22 1Q22 Period end balance(1) ($ in billions) $47.0 $45.1 $44.1 $43.4 $42.2 30+ days PD and accruing 0.10% 0.15% 0.33% 0.33% 0.17% 90+ days PD and accruing 0.03% 0.05% 0.07% 0.03% 0.02% NCOs (annualized) 0.14% 0.08% 0.15% -
Slide 52: Consumer Credit Quality Review
Consumer Credit Quality Review Home Equity: 1Q23 4Q22 3Q22 2Q22 1Q22 Period end balance ($ in billions) $10.2 $10.4 $10.4 $10.4 $10.3 30+ days PD and accruing 0.86% 0.91% 0.71% 0.68% 0.62% 90+ days PD and accruing 0.17% 0.14% 0.11% 0.12% 0.11% NCOs (annualized) -0.02% -0.04% -0.07% -0.08% -0.03% NAL
Slide 53: Consumer Credit Quality Review, continued
Consumer Credit Quality Review, continued Automobile: 1Q23 4Q22 3Q22 2Q22 1Q22 Period end balance ($ in billions) $13.2 $13.2 $13.4 $13.6 $13.5 30+ days PD and accruing 0.76% 0.89% 0.71% 0.78% 0.66% 90+ days PD and accruing 0.05% 0.07% 0.05% 0.05% 0.04% NCOs (annualized) 0.14% 0.12% 0.07% 0.00% 0.01
Slide 54: Delinquencies
Delinquencies Commercial (30+ Days(1)) Commercial (90+ Days(1)) 0.43% 0.39% 0.33% 0.32% 0.30% 0.26% 0.23% 0.19% 0.07% 0.12% 0.05% 0.04% 0.04% 0.03% 0.03% 0.03% 0.02% 0.02% 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Consumer (30+ Days(2)) Consumer (90+ D
Slide 55: Criticized Commercial Loan Analysis
Criticized Commercial Loan Analysis End of Period ($ in millions) 1Q23 4Q22 3Q22 2Q22 1Q22 Criticized beginning-of-period $3,700 $3,843 $4,206 $4,385 $4,711 Additions / increases 893 859 735 824 727 Advances 159 167 248 224 162 Upgrades to “Pass” (323) (484) (666) (527) (512) Paydowns (483) (638) (6
Slide 56: Notes
Notes Slide 5: (1) For J.D. Power 2023 award information, visit jdpower.com/awards (2) By number (units) of 7(a) loans nationally (3) Includes cash and cash equivalents, and contingent capacity at Federal Reserve & FHLB (4) Peer data as of 4Q22 Slide 9: (1) Source: Company’s 2022 Form 10-K | Calcula
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