Huntington Bancshares (HBAN) Chief Executive Stephen Steinour likes to refer to the Midwest as the "Recovery Belt," but the third-quarter results of his bank and other Ohio-based regionals show that the region's recovery may be sputtering a bit.

Though Huntington, Fifth Third Bancorp (FITB) and KeyCorp (KEY) all reported relatively strong earnings in the quarter, organic loan growth weakened amid continued uncertainty about the direction of the economy.

In a conference call with analysts, Steinour said commercial loan demand was particularly slow in September and is likely to remain so until borrowers see more positive signs from Washington on tax cuts and government spending.

"Put yourself in their shoes," Steinour said of the privately held businesses that make up the bulk of Huntington's commercial customer base. "You have a tremendous amount of uncertainty, and I think that's causing a pullback."

KeyCorp's president of corporate banking, Chris Gorman, said he has seen a definite slowdown in equipment purchases by corporate customers. "I do think there is a fair amount of hesitancy out there in the marketplace and the business community," he said on a call with analysts.

Of the three Ohio banks, Cleveland-based KeyCorp posted the strongest loan growth from the prior quarter, a 9.6% annual pace, though much of it came from acquisitions of 37 branches in Western New York from First Niagara Financial Group (FNFG) and its branded credit card assets from Elan Financial Services, a unit of U.S. Bancorp (USB).

Still, the growth was better than analysts had forecast and it helped drive a 17 basis-point jump in its net interest margin, to 3.23%. In a research note to investors, Sandler O'Neill said it was expecting a net interest margin in a range of 3.17%.

"In a quarter marked by notable [net interest margin] weakness at most banks, Key was the only name we can think of that actually went meaningfully the other way," Sandler said in its report.

Overall KeyCorp reported third-quarter net income attributable to common shareholders of $214 million, up almost 1% from a year earlier but down about 7% from the second quarter. The company's earnings per share of 23 cents were 3 cents better than the average estimates of analysts polled by Bloomberg.

KeyCorp said it was on track to cut roughly $30 million to $50 million in costs by the end of the year. It shuttered 16 branches in the third quarter and had three more scheduled for closure in the fourth quarter, said Beth Mooney, KeyCorp's chief executive and chairman.

The company has pledged to cut expenses by $150 million to $200 million by the end of 2013, close up to 5% of its branches and lower its efficiency ratio to between 60% and 65%.

In heavy trading, Key's shares were up 5% late in the day Thursday, to $8.84.

At Cincinnati-based Fifth Third, loans increased 1.5% from the prior quarter, to $84.8 billion, below the 4% growth Sandler had forecast. But in a conference call with analysts and investors, executives seemed confident that loan growth would pick up after the presidential election. "Based on our pipelines and seasonally strong production in the fourth quarter, we expect loan growth to be a bit stronger in the fourth quarter," Chief Executive Kevin Kabat said.

For the quarter, Fifth Third reported earnings of $354 million, down 5.9% from the prior quarter and 5.1% from the same period last year. The company attributed the dip largely to onetime events, including expenses related to the sale of certain investment funds and charges related to the extinguishment of debt. Its earnings per share of 38 cents were in line with analysts' estimates.

Fifth Third shares were off 2 cents, to $15.12, late Thursday.

Huntington, of Columbus, reported a record $167.8 million profit in the third quarter, up 10% from the second quarter and 17% year over year. The company attributed the gains to increased revenues and fee income driven primarily by mortgage banking activity.

Still, investors seemed more concerned with the 4-basis point slide in its net interest margin, to 3.38%. Huntington's shares fell more than 6% in afternoon trading, to $6.61.

Huntington's average loans fell 10% on an annual basis from the prior quarter, to $40.1 billion, largely because of a decrease in automobile loans and commercial real estate loans. Also, commercial and industrial lending "slowed much more significantly than we had anticipated," Sandler O'Neill said in its research note. Overall, Sandler had expected Huntington's total loans to increase 12% from the prior quarter.

In a conference call, Steinour downplayed the slowdown in C&I activity, saying loan growth is "only part of the story." He noted, for example, that the company has added more than 240,000 households over the last two years following the rollout of its new, simplified checking account products and said that 75.9% of customers now have at least four products and services with Huntington, up from 72.8% this time last year.

Huntington has also opened 51 grocery store branches in Ohio and Michigan so far this year and is on pace to open 40 more over the next two years as part of a broad strategy to add more retail accounts and boost cross-sell ratios.

Asked during the conference call if the company would consider acquisitions to compensate for sluggish loan growth, Steinour said the company intends to stick to its growth plan.

"An acquisition has the potential to create a distraction," he said.

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