Huntington Bancshares Inc. — among the country's more troubled midsize banks — said it is on track make money in 2010 after losing more than $3 billion last year.
"We expect to return the bank to profitability," Stephen Steinour, Huntington's chairman and chief executive, said in a conference call with reporters on Friday. "It's very clear to us that 2009 was our watershed year."
Steinour said there are number of good things going for the Columbus, Ohio, lender, which spent last year reeling from massive losses on bad subprime home and commercial real estate loans. It last turned a profit in the third quarter of 2008.
Though it continued to lose money last quarter, it has quarantined its two biggest problems — its exposure to Midwestern home builders and to a New Jersey subprime lender that it inherited in a 2007 acquisition. It is sitting on large amounts of what Steinour has called "offensive capital" after raising nearly $1.7 billion last year. Reserves, chargeoffs and provisions rose in the quarter, but all three likely peaked in 2009, Steinour said. Deposits are growing, as are pretax, preprovision profits.
Like other regional lenders, Huntington is seeing promising signs in loan quality after working out and charging off its most problematic loans.
Nonperforming assets fell from the prior quarter; its level of new nonperforming loans was its lowest in five quarters in the last three months of the year. New nonaccruing CRE loans also fell considerably as more borrowers managed to pay off their loans, a sign of economic stability.
Huntington has also undergone a substantial reorganization. Its senior ranks have been reshuffled, with new heads of marketing, strategy and commercial real estate.
Steinour took over as CEO of the $52 billion lender just as losses peaked in the first quarter of 2009. He had one overriding message for market watchers on Friday: the worst is over.
"We still have credit challenges, but we're much better [equipped] to deal with them today than a year ago," Steinour said.
Investors welcomed Steinour's optimistic tone. Its shares rose 3.53% to $4.69 on Friday.
Terry McCevoy, an analyst with Oppenheimer & Co., said Huntington "clearly has potential to make money in the latter part of 2010" if it meets its earnings and chargeoff projections. He said the company's aggressive reserving could deliver a bounce to the bottom line later this year should provisions continue exceeding chargeoffs.
Jeff Davis, an analyst with FTN Equity Capital Markets Corp., said Steinour's upbeat tone signals that he is taking ownership of the company's performance in 2010 after spending last year dealing with other peoples' mistakes.
Steinour "has done a lot of heavy lifting in 2009, building the reserve and building capital," Davis said. "The sins were committed before he got there."
Davis said the company has a "very attractive" core deposit base around Columbus, and that it will be a "key institution in terms of Midwest consolidation" in coming years, by either buying up smaller companies or merging with another large regional player like PNC Financial Services Group Inc. or Fifth Third Bancorp.