Huntington's profits rise, but it boosts reserves on war worries

Key insight: The decision to stash an extra $4 billion at the Federal Reserve cushions Huntington against war-related disruption.

What's at stake: The downside of the more cautious stance is that it shaves five basis points off Huntington's expected net interest margin for 2026. The company still beat analysts' first-quarter profit expectations.

Expert quote: "We want to ensure that we're always in that incredibly strong position of strength." — Chief Financial Officer Zach Wasserman

UPDATE: This story has been updated with additional information about Huntington's first-quarter earnings report.

Huntington Bancshares has boosted its Federal Reserve cash balance by $4 billion due to unease over the war with Iran.

The move, which Huntington executives disclosed Thursday, reflects greater caution regarding the war's potential economic effects than other bank CEOs have expressed during earnings season.

"I don't like what's happening in the Middle East," Huntington CEO Steve Steinour told American Banker on Thursday. "It's affecting countries around the world."

Steinour characterized the decision to boost the Columbus, Ohio-based company's reserves as "prudent," but it also carried an opportunity cost.

The $285.4 billion-asset Huntington could have deployed those funds into higher-yielding loans. Carrying extra cash shaved five basis points off the bank's expected 2026 net interest margin, Chief Financial Officer Zach Wasserman told analysts.

"We genuinely have no concern whatsoever about our own liquidity or our customers' confidence in us," Wasserman said on the company's quarterly earnings call. "With that being said, the environment could change quickly. We want to ensure that we're always in that incredibly strong position of strength."

The war is approaching its two-month anniversary. And while most banks — including Huntington — say it has not significantly disrupted the economy, the potential for greater dislocation increases as the conflict continues.

Overall economic conditions across Huntington's 21-state footprint remain "consistent with prior quarters," Steinour said. He added that some customer segments, particularly lower-income consumers, "continue to feel pressure from the cumulative impacts of inflation."

A longer war could fuel additional inflation, Steinour predicted. If the conflict is resolved in the next few weeks, "we'll pull the money back," he said.

Beating expectations

Huntington's first-quarter results provided a glimpse of the earnings power the company can bring to bear now that its deals for Cadence Bancorp and Veritex Holdings are complete.

End-of-period loans and deposits both increased 35% from a year ago, to $188.8 billion and $223.5 billion, respectively. Revenue topped $2.59 billion, up 34% from the first quarter of 2025.

"We are approaching an inflection point where execution will compound earnings power and higher returns," Steinour said on the call with analysts.

Huntington reported first-quarter earnings per share of $0.25, outpacing analysts' expectations by three cents, according to S&P Capital IQ. Stripping out merger-related costs from Huntington's acquisition of Cadence Bank, which closed in February, the company's earnings per share totaled $0.37.

Net income totaled $523 million, which was down 1% from the same period last year, primarily due to expenses related to the Cadence and Veritex deals.

"Cost initiatives are tracking on schedule, and we're already seeing revenue benefits as customers adopt more of the Huntington platform," Steinour said.

The first-quarter numbers also included significantly higher-than-expected levels of noninterest income, including a "phenomenal" capital markets performance, Chief Financial Officer Zach Wasserman said on the conference call. Huntington reported first-quarter capital-markets revenue totaling $132 million, almost double the $67 million a year earlier.

Excluding the impact of Huntington's acquisition of three business units from investment bank Janney Montgomery Scott in January, capital-markets growth was 60%. Wealth, payments and loan and deposit fees also recorded double-digit annual gains.

As a result, Huntington upped its guidance for full-year 2026 noninterest income growth. Previous guidance called for an increase of 26.5% to 29.5% over the 2025 baseline of $2.22 billion. The new forecast is for 31% to 33% growth.

The fee results were "a particular bright spot," Wasserman said. "Every one of our businesses is exceeding the plan."

"At the core, this was a solid quarter for the company with decent core sequential loan and deposit growth and very strong fee trends," RBC Capital Markets analyst Jon Arfstrom wrote in a research note.

Huntington's stock price was largely unchanged Thursday at $16.83.