Huntington Bancshares Rating Upped - Analyst Blog

Following the announcement by Huntington Bancshares Inc. (HBAN) of its capital raising plan to support the repayment of the bailout loan received under the U.S. Government's Troubled Asset Relief Program (TARP), Fitch Ratings have upgraded the ratings on the company.

The long-term issuer default rating of Huntington Bancshares was upgraded by Fitch to “BBB+” from “BBB”. Both the ratings are investment grade. The default rating for Huntington National Bank, Huntington Bancshares' subsidiary, was affirmed at “BBB+”. Additionally, the individual ratings for Huntington Bancshares and Huntington National Bank were also raised to B/C from C by the rating agency. Fitch issued a “Stable” rating outlook as well.

Columbus, OH-based Huntington Bancshares announced a $920 million common stock offering on Monday. The bank also expects a $300 million subordinated debt offering in future. The proceeds will be used to repurchase $1.4 billion of Series B Fixed Rate Cumulative Perpetual Preferred Stock the bank had issued to the U.S. Treasury under TARP. The time of repurchase would depend on the authorization of the banking regulators and the approval of the Treasury.

Yesterday, the company also priced an offering of around 146 million shares of its common stock at $6.30 per share to the public, generating aggregate gross proceeds of $920.0 million. This was below Monday's closing price of $6.66. Goldman, Sachs & Co. (GS) acted as bookrunning manager for the offering with Sandler O'Neill + Partners acting as co-manager.

Fitch has recognized the improved capital and liquidity profile of Huntington Bancshares that resulted in its solid position with its subsidiary. The rating agency does not expect the parent company to supply capital to Huntington National Bank.

The TARP money repayment is positive factor for the company for the long run as it will become free of significant government intervention, but the market seems to react adversely to the large common stock offering, which was priced below the Monday's closing price of the stock.

Investors' appetite for the stock appears to reduce as the substantial common stock offering would result in earnings dilution in future. The stock moved down 5.4% to $6.30 in Tuesday's trading session on the NASDAQ.

Huntington Bancshares currently retains its Zacks #3 Rank, which translates to a short-term Hold rating.

 
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