Higher Costs to Hurt Huntington Bancshares' Q3 Earnings, NII to Aid

Huntington Bancshares Incorporated HBAN is slated to report third-quarter 2024 results results on Oct. 17, before the opening bell. The company's quarterly revenues and earnings are expected to have declined year over year.

In the last reported quarter, the bank recorded a positive earnings surprise of 7.14%. Results have reflected improvements in average loans and deposits. However, a fall in net interest income (NII) and elevated expenses were headwinds.

HBAN has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 8.87%.

The Zacks Consensus Estimate for HBAN's third-quarter earnings of 30 cents per share has remained unchanged in the past seven days. The figure indicates a 16.67% decline from the year-ago reported number.

The consensus estimate for revenues is pegged at $1.86 billion, indicating a year-over-year decline of 1.67%.

Key Factors & Estimates for HBAN's Q3 Result

Loans & NII: On Sept. 18, the Federal Reserve cut the interest rates by 50 basis points to 4.75-5% for the first time since March 2020. While the rate cut is not expected to significantly affect HBAN's NII in the quarter under review, greater clarity on the Fed's rate cut path, along with a stabilizing macroeconomic environment, is likely to have aided the lending outlook.

The Zacks Consensus Estimate for NII is pegged at $1.35 billion, indicating a 3% rise sequentially.

Per the Fed's latest data, the demand for commercial and industrial loans and consumer loans was decent in the third quarter of 2024, while real estate loan was subdued.

Given the company's significant exposure to commercial loans, HBAN's lending book is likely to have been supported by the decent demand in commercial loans while the subdued real estate loan demand might have offset growth to some extent.

The Zacks Consensus Estimate for average total earning assets of $180.5 billion for the quarter under review indicates a 1.4% rise from the prior quarter's levels.

Non-Interest Income: As the central bank lowered the interest rates, mortgage rates started to come down. The rates declined to almost 6.2% by the end of the third quarter. Although mortgage origination volume remained subdued in the quarter under review, refinancing activities witnessed a significant surge supported by lower mortgage rates. This is likely to have supported HBAN's mortgage banking fees. The Zacks Consensus Estimate for mortgage banking income is pegged at $30.6 million, suggesting a 1.8% increase from the prior quarter's reported figure.

Global mergers and acquisitions in the third quarter of 2024 showed improvement after subdued 2023 and 2022.

Both deal value and volume were decent during the quarter, driven by solid financial performance, higher chances of a soft landing of the U.S. economy, buoyant markets and interest rate cuts. Also, the performance of the capital markets business, including issuance activities, improved. As a result, the company's capital markets and advisory fees are expected to have increased.

The Zacks Consensus Estimate for capital markets and advisory fees is pegged at $76.14 million, indicating 4.3% growth sequentially.

The strong performance of the equity market is likely to have supported wealth and asset management revenues during the quarter under review.The Zacks Consensus Estimate for wealth and asset management revenues is pegged at $92 million, indicating a 2.3% rise from the previous quarter's reported figure.

The consensus estimate for customer deposit and loan fees for the third quarter is pegged at $84.6 million, indicating a rise of 1.9% on a sequential basis. The consensus mark for insurance income of $18.3 million implies a sequential rise of 1.7%.

The consensus mark for total non-interest income is pegged at $507.4 million, indicating a 3.3% sequential rise.

Expenses: Huntington Bancshares' higher outside data processing and other services expenses, deposit and marketing expenses are anticipated to have raised its costs in the third quarter. Also, the bank's efforts to expand its commercial banking capabilities in high growth markets by adding more branches and hiring professionals are expected to have contributed to higher costs.

Though strategic efficiency initiatives are likely to reduce expenses to some extent, long-term investments in key growth initiatives are expected to have kept its expense base higher.

Asset Quality: HBAN is likely to have set aside a substantial amount of money for potential delinquent loans, given the expectations of an economic slowdown.

The Zacks Consensus Estimate for total non-performing assets of $780.08 million indicates a marginal increase from the figure reported in the prior quarter.

What Our Model Unveils for HBAN?

Per our proven model, the chances of Huntington Bancshares beating estimates this time are low.  The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here, as you can see below.

Earnings ESP: Huntington Bancshares has an Earnings ESP of -2.78%.

Zacks Rank: HBAN currently carries a Zacks Rank of 3.

Stocks to Consider

Here are some finance stocks that you may want to consider, as our model shows that these hold the right combination of elements to post an earnings beat this time around.

First Horizon Corporation FHN has an Earnings ESP of +3.18% and carries a Zacks Rank #3 at present. The company is scheduled to release its third-quarter 2024 earnings on Oct. 16.

FHN's quarterly earnings estimates have been unchanged over the past seven days.

The Earnings ESP for M&T Bank Corporation MTB is +0.33% and it also carries a Zacks Rank #3 at present. The company is slated to report its third-quarter 2024 results on Oct. 17.

The Zacks Consensus Estimate for MTB's quarterly earnings has remained unchanged in the past seven days.

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