Manufacturing comeback push cheered by Midwestern banks

Stephen Steinour may have even more reason for optimism than other bankers who have appeared revitalized this earnings season by rising rates, the prospect of a regulatory rollback and other pro-banking policy trends.

Talk of a manufacturing revival is building, and if it pans out few lenders are as well positioned to take advantage as is his Midwestern regional bank, Huntington Bancshares in Columbus, Ohio.

“Half of the manufacturing jobs in the United States are in Ohio, Michigan and Indiana,” Steinour, Huntington’s chairman and CEO, said Wednesday in an interview. “That’s our core footprint. So, when you think about further manufacturing expansion, significant manufacturing growth, of course it will be where you have a skilled workforce.”

While the new Trump administration has not fully laid out plans to spur manufacturing, a growing number of corporate leaders inside and outside of financial services appear to be buying into the notion that something big is at hand. According to The Detroit News, Ford CEO Mark Fields said Tuesday that he would work with Washington “on tax policies, on regulation and on trade to really create a renaissance in American manufacturing.”

Fifth Third President and CEO Greg Carmichael was more restrained in an interview this week, saying it is still too early to talk about renaissances. Yet Carmichael also said that if the automobile and defense sectors do grow and infrastructure spending picks up, “that’s going to bode well for a lot of our customers.” Moreover, Fifth Third expects to see an increase in loans to industries that rely on manufacturing, he said later in the interview.

Cincinnati-based Fifth Third reported 2016 net income of $1.6 billion Tuesday, down 9% from 2015.

For its cross-state rival Huntington, a manufacturing renaissance would count as one more tail wind for a bank already on a roll.

Huntington reported 2016 net income of $685 million on Wednesday. That total is 1% less than the comparable 2015 figure, but Huntington’s 2016 results included $282 million in nonrecurring expenses connected to its acquisition of FirstMerit, which was completed in August.

Steinour did not disclose a net income target for 2017, but it seems safe enough to assume the $100 billion-asset company is counting on a significantly better result this year. It is projecting a 20% bump in total revenue, which totaled $3.6 billion last year, and promising to finish the phase-in of $255 million in merger-related cost savings before the end of the third quarter.

If things work as planned, Huntington said it would be able to drive down fourth-quarter expenses by 16% to $609 million.

It should also see a significant jump in small-business lending volume in Chicago, a market it entered as a result of the FirstMerit acquisition. Steinour said Huntington has just finished installing a team of 12 Small Business Administration lenders there.

“Chicago is a huge small-business market,” Steinour said. “It’s about the size of Ohio, maybe even a little bigger. “

Huntington’s positive outlook reflects the enthusiasm of its customers, Steinour said in a conference call with analysts earlier Wednesday. “Many of the businesses in our footprint have expressed optimism about the business-friendly environment expected from the new administration and regulatory regime.”

In that respect, Steinour is echoing what bankers around the country are saying.

Phil Green, chairman and CEO at the $29.8 billion-asset Cullen/Frost Bankers in San Antonio, said Wednesday that he is seeing a definite pickup in economic activity in the markets his bank serves.

“As I’ve gone around the state visiting all of our locations … one consistent message was how many customers – particularly mid and small customers – are moving forward with plans that they had delayed,” Green said in a conference call with investors. “We are definitely seeing general optimism in the market moving forward.”

Like Huntington, Cullen/Frost did not disclose specific growth targets for 2017, but Green said loan growth would be “better for sure” than the 3.1% the company generated last year.
Cullen/Frost reported 2016 earnings of $296.2 million Wednesday, up 9% over 2015.

Kristin Broughton and Alan Kline contributed to this report.