Huntington lowers revenue guidance ahead of anticipated rate cuts

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Huntington Bancshares is warning investors that it expects revenue growth to slow in the second half of this year due to anticipated interest rate cuts from the Federal Reserve.

In its second-quarter earnings presentation Thursday, the $108 billion-asset Huntington lowered its guidance for 2019 revenue growth to between 3% and 4.5%, down from the 4% to 6.5% it was forecasting in late May,

Huntington Chief Financial Officer Howell McCullough said in an interview that the revised guidance is "predominately from what will happen in the interest rate environment.”

Huntington, based in Columbus, Ohio, is expecting the Fed to cut interest rates cuts twice this year and two more times next year. Across the industry, executives are anticipating their net interest income and margins will be squeezed by the lower rates, and regionals such as Huntington have put hedging strategies in place to help mitigate the impact.

Huntington has about $21 billion in hedges against falling interest rates on the balance sheet as of the end of June, including about $11 billion added in the second quarter alone.

Huntington reported a 3% increase in net income in the second quarter when compared with a year earlier, to $364 million. Its earnings per share of 33 cents beat by a penny the mean estimates of analysts polled by FactSet Research Systems.

Huntington continued to sale back its commercial real estate lending. The company reported $6.8 billion in commercial real estate loans in the second quarter, down 4.3% from the same period one year ago. McCullough said that the company has “pulled back substantially” from multifamily properties, construction loans and lending on retail properties.

“Those are all areas that could see some pressure in the next downturn,” McCullough said.

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Interest rates Earnings Net interest margin Commercial real estate lending Huntington Bancshares Federal Reserve