Supply chain disruptions are putting a crimp in automotive lending at Huntington Bancshares, and conditions in that sector will remain challenging in 2022, Chairman and CEO Steve Steinour says.
“We’re not counting on auto to be a tailwind next year,” Steinour told analysts on a conference call Thursday. Expectations are that supply chain issues will persist “deep into next year,” he said.
Auto loans made up 26% of the Columbus, Ohio, company’s $50.4 billion of consumer loans and leases at Sept. 30. Auto originations totaled $1.8 billion in the third quarter but would have been higher if manufacturers weren’t having such a hard time obtaining computer chips for new vehicles, according to Steinour.
“There’s no doubt we could have done better with more inventory,” Steinour said in an interview before the conference call. “I was talking to one dealer with four Cadillac dealerships yesterday. He doesn’t have a new car on any of the lots. Absolutely we could have done better. … The world we live in is such that it’s going to take time to work through these supply constraints.”
The story was much the same in Huntington’s recreational vehicle and marine business, where originations totaled $1.3 billion through the first nine months of 2021. “It’s supply constraints,” Steinour said. “Demand outstrips supply. If they could have made more boats or recreational vehicles, they could have sold them.”
Huntington completed its $6 billion acquisition of Detroit-based TCF Financial in June, adding $36 billion of loans to its balance sheet. Excluding Paycheck Protection Program credits, third-quarter loan growth was flat compared with the previous quarter. Chief Financial Officer Zachary Wasserman said on the conference call he expects only “modest” fourth-quarter loan growth.
The muted forecast is due in part to the fact hundreds of Huntington bankers who had been focusing on completing the TCF merger and the subsequent systems conversion only recently returned to their normal, revenue-producing roles, leaving them with insufficient time to stoke fourth-quarter results, according to Steinour.
“It’s harder to do business between Thanksgiving and the new year if it’s not already in the pipeline,” Steinour said. Still, “we're very optimistic about full-year 2022” because of stronger prospects in commercial real estate, small-business and commercial and industrial lending.
The $173.9 billion-asset Huntington reported third-quarter earnings of $377 million, or 22 cents a share, on revenue of $1.7 billion. Those results included $234 million of pretax expenses connected with the TCF deal, which subtracted about $0.13 per share from the company’s bottom line.
"Our third-quarter results demonstrated a solid start for the combined revenue-generation potential of Huntington following the acquisition of TCF," Steinour said.
Huntington reported a $15 million loss for the quarter that ended June 30, due mainly to more than $560 million in merger-related costs.
Though Huntington consolidated 188 branches as part of the TCF integration process, Steinour said it continues to work to optimize its distribution channels. And with more transactions shifting to digital channels, Huntington plans to close another 62 branches —6% of its existing network — in the first quarter.
About 40% of new deposit accounts were opened online in the third quarter, up from 28% a year earlier. Meanwhile, digital logins topped 145 million for the three months that ended Sept. 30.
“Our strategy is centered on supporting customers thinking where and when they want and meeting them through their preferred channel,” Steinour said.
With the TCF deal closed and the system conversion under its belt, Huntington is focusing squarely on driving core growth. While the company will consider nonbank deals, another whole-bank acquisition is low on the list of priorities.
“We think we have tremendous revenue upside here,” Steinour said.
Shares of Huntington closed Thursday at $15.92, virtually unchanged.
Scott Seifers, who covers Huntington for Piper Sandler, wrote in a research note Thursday that the company’s results represented “another noisy quarter,” but that the positives outweigh the negatives.
“We consider it a solid showing,” Seifers wrote.
