After rise in deposit costs, Huntington foresees 2H rebound

• Key takeaway: The Columbus, Ohio, company completed the Cadence system conversion in late June, which should serve as a springboard to higher growth in the third and fourth quarters, executives said.
• Supporting data: The conversion gives Huntington much more control over and insight into more than 1.4 million deposit accounts acquired from Cadence. 
• Expert quote: "This was the largest conversion we've ever done. It was the fastest we've ever done, and it was the best we've done, at least in my tenure." — Huntington Chairman and CEO Steve Steinour

While higher funding costs left their mark on Huntington Bancshares' second-quarter results, the Columbus, Ohio-based company is forecasting a strong finish to 2026 now that its most recent merger-related conversion is complete.

Business should pick up in the third quarter before peaking during the final three months of 2026, Chief Financial Officer Zach Wasserman said Thursday on a conference call with analysts.

"I expect fourth-quarter earnings-per share to be very strong," Wasserman said. "If I double-click into that to share my view of how the model would work, it's high-single-digit loan and deposit growth, a stable-to-rising net interest margin, strong spread revenue" and "continued extraordinarily good fee performance."

The $284 billion-asset Huntington reported second-quarter net income totaling $727 million Thursday, up 39% from the quarter ended March 31. That three-month period partially reflected the impact of the acquisition of the $53 billion-asset Cadence Bancorp, which closed Feb. 2.

Second-quarter loans of $189.3 billion and deposits of $223.4 billion demonstrated linked-quarter organic growth — 1.2% and 1.8%, respectively, when adjusted for the timing of the Cadence deal closing. Meanwhile, fee-based businesses continued to expand, and credit remained subdued.

If there was a fly in the ointment, it came on the net-interest-income line. According to Wasserman, full-year spread income is trending toward the lower end of Huntington's previously stated guidance targeting 37% to 43% year-over-year growth. The end result could even fall "a touch below" 37%, Wasserman added.

The forecast adjustment comes as deposit costs — which have emerged as an issue for a number of banks — ticked upward, rising six basis points to 1.88% during the second quarter. Huntington's net interest margin shrank by three basis points to 3.21%, but Wasserman said the second quarter would be the "trough," predicting expansion throughout the second half of 2026.

Noninterest income jumped 15% during the quarter ended June 30 to $785 million. Fee revenue is expected to finish 2026 at the high end of Huntington's 31%-33% year-over-year growth guidance, helping offset weakness in the net-interest-income category, according to Wasserman.

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Though some analysts and investors zeroed in on the net-interest-income projection — Huntington shares were trading down nearly 5% at $17.40 Thursday afternoon — senior executives, including Chairman and CEO Steve Steinour, insisted the company is poised to outperform in the second half of 2026 and into 2027.

The Cadence systems conversion, which Huntington completed near the end of the second quarter, should be a significant catalyst. Steinour described it as a "springboard."

"You want to, in any combination, get everyone on the same platform, so you can start managing more dynamically," the CEO told American Banker. "This was the largest conversion we've ever done. It was the fastest we've ever done, and it was the best we've done, at least in my tenure."

Converting paves the way for Huntington to fully market its wider product set within the Cadence customer base, made up of "1.4 million deposit accounts and many hundreds of thousands of customers," Steinour said. "All of our specialty businesses, capital markets, payments, wealth — they dwarf what Cadence had. I'm not trying to be critical of Cadence. That's just the reality of something five times its size."

The majority of those new customers reside in the rapidly growing Texas marketplace, where Huntington has built a substantial presence with deals for Cadence and, shortly before that, Dallas-based Veritex Holdings.

"Twelve months ago, we were not in the top 400 banks in Texas. Today, we're in the top eight," Brant Standridge, Huntington's senior executive vice president, consumer and regional banking, said on the conference call. "We had no presence in Dallas and Houston. Today, we're top-five. We had no branches. Today, we have 140."

Huntington is also moving forward on its plan to open 55 branches across North Carolina and South Carolina. It opened a branch Monday in Summerville, South Carolina, its 11th in the two-state region.

"Those branches have generated over $300 million in new deposits, about double the expectations that we had originally set," Standridge said on the conference call.

"We're very pleased" with the company's performance, Steinour told American Banker. "We've got a lot of work to do, it's a competitive market, but we're optimistic about what this is going to generate for us."

Analysts' reaction to Huntington's second-quarter report was mixed. Jefferies' David Chiaverini wrote that Huntington's guidance "skewed negative," adding that softer net interest income and net interest margin numbers "outweigh" a stronger outlook for loan growth and fee income.

"There is a 'show-me' attitude from investors on the planned improvement," Truist Securities analyst Brian Foran wrote in his research note.

But RBC Capital Markets analyst Jon Arfstrom characterized Huntington's second-quarter results as "another solid quarter for the company with results aligned with recent updates."