Record revenue, lower expenses push Huntington profit higher

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Executives at Huntington Bancshares are bullish about the Columbus, Ohio, company’s growth prospects after a strong third quarter.

The $97 billion-asset Huntington said in a press release Tuesday that its quarterly profit rose by 37% from a year earlier, to $378 million.

Net interest income rose by 6%, to $810 million. Total loans increased 7%, to $73.4 billion, while deposits rose by 4%, to $81.7 billion. The net interest margin widened by 3 basis points, to 3.32%.

“I’m bullish about the economy in our footprint,” Chairman and CEO Steven Steinour said in an interview Tuesday. “There’s more global uncertainty than I can remember, but so far it hasn’t derailed things.”

Huntington’s loan pipeline remains full and the recent trade accord among the United States, Canada and Mexico should provide a lift to the manufacturing-rich Midwestern states where Huntington does most of its business, Steinour said.

Perhaps the only cloud on the macroeconomic horizon remains a labor shortage. Steinour said the Midwest has more job openings than any region in the country, adding some clients are telling the bank they have backlogs of unfilled orders stretching into 2020.

“We’re hearing about [labor shortages] constantly from different customers and across all markets,” Steinour said.

While customers may be able to boost output if they had more labor, they appear to be doing enough business to drive Huntington’s results. Revenue grew 5%, to a record $1.2 billion, boosted by a 5% increase in noninterest income, to $342 million.

Noninterest expense fell 4%, to $651 million, though Chief Financial Officer Mac McCullough warned that operating costs will increase in the fourth quarter when the company plans to record a $40 million charge tied to plans to shutter 70 branches, primarily in Michigan and Ohio.

Huntington plans to reinvest future savings from the closures into digital- and mobile-banking efforts.

About two-thirds of Huntington’s customer base is active in online banking. More than 40% use mobile banking. Both metrics are expected to jump in the near future. Given those trends, mobile and digital strategies are receiving significant attention in ongoing corporate strategic planning, McCullough said.

Steinour attributed the shift to digital and mobile banking to “years of activity and investment on the bank’s part, combined with even more customer interest and demand in self-service options as opposed to going to a bank branch.”

Since early 2017, Huntington has announced 123 branch closures, including the 70 it disclosed earlier this month. Once those locations are taken offline, the branch count will drop to 900, down from a peak of 1,091 in 2016 after it bought FirstMerit in Akron, Ohio.

Huntington’s asset quality remains solid and executives said they see little sign of the irrational loan and deposit pricing that frequently come with the later stages of an economic recovery.

“Competition in the region has been very rational.” McCullough said during Tuesday's conference call. “I don’t see anyone at any asset size doing anything unreasonable.”

Huntington’s nonperforming assets amounted to 0.55% of total assets. Net chargeoffs totaled 0.16% of average loans, a level that is well below the company’s target range of 0.35% to 0.55%.

“We had a really good quarter and we’re having a really good year,” Steinour said.

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