HBAN - Earnings call transcript Q4 2018 | Huntington Bancshares Incorporated

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Operator

Greetings, and welcome to Huntington Bancshares Fourth Quarter Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mark Muth, Director of Investor Relations. Thank you. ahead. go Please

Mark Muth

our welcome. rebroadcast for Brenda, reviewing Muth, of the be the section Director be being of call Thank and close about recorded Copies I’m X of Relations will of Relations Investor Huntington. on as be www.huntington.com. the Investor This found is a you, available the Mark website, starting slides call. can from we’ll hour

Dan call. McCullough, Neumeyer, Steve are Chairman, and Chief Steinour, also Financial Mac participating portion Officer. Credit Our the presenters today be Chief CEO; President will Officer, Q&A and in of today’s

As discussion, are to and may cause will based assume period, materially. Slide update subject at noted statements and uncertainties, contain which such We statements. information and on risks available assumptions X, including the differ no changes, results on Such actual obligation this today’s forward-looking to statements. time Q&A to

including slide XX-K, to filed a with uncertainties, please filings. For refer SEC, most risks and discussion and material complete and X-K our this recent of the XX-Q forms

it now me Steve. over Let to turn

Steve Steinour

thank Mark, joining today. call everyone to Thanks the for you and

we fourth always, the and your As year produced support. full quarter XXXX. for in results interest very good We appreciate the and

over $X.X year we billion, the marks common the $X.XX. were income. per income share record For of Full XX% full net reported consecutive net XXXX, of an year, of which increase fourth year earnings

five in all long-term a schedule. financial our achieved of years XXXX, two basis we ahead year Importantly, goals GAAP on full of

straight operating annual of began managing in And point was result We’re efficiency XXXX. our of we prior improvement sixth especially ratio basis a versus XX%, with the year goal this leverage, pleased XXX year. targeting year positive our the an of to full

common very Our equity was XX%. also return on at strong tangible

dividend, enabled organic support XXXX. year million cash the also performance growth. to we of as increased represented shareholders billion dividend our returned We second year, and our a priority distribution support our the share our XX% to to $XXX payout behind repurchases power, you which XXXX for nearly payout in capital return XX% continue highest an is marked during ratio eighth our Last increased year targeted which shareholders, with know us financial earnings increase consecutive capital will strong Our Coupling total to capital discipline our to total generation $X.X capital believe the with payout ratio strong risk of XXX% of forward. earnings. of going a of

top creating Slide X, with shareholder returns. high As cycle Huntington we quartile through of vision performing the on briefly and bank outlined a strategies the delivering developed regional

best believe Our metrics fully We deliver among key profitability businesses our sustainable are advantage will that the year built in performance we the future. quartile in competitive top the industry. in

to We retirement already I’ve to the And achieved goals. increase can shareholders. a see our we mentioned, requiring drive aggregate an officers financial continues for our make appetite, remain of and organic equity awards. had as standards importance a targets to reminder, as reinforced implemented risks the these the XXXX. you successfully illustrates billion, basis committed nine focused comply which X% And in years restrictions revenue We franchise to as previous perform holder long-term five adjusted X we driving of well $X.X And of the we company Slide we’re each GAAP by with X,XXX as on on fronts, us a over as growth. our well ago. top their of on need these record and we allowing moderate-to-low to on XXXX. slide, Our capabilities during long-term investments many sustained consistent financial performance risk

GAAP year-over-year on adjusted an basis. X% declining basis, controlled, well remained and X% expenses on Our a up

ratio through our in in decisioned, results. down achieved exemplifies Our to executed year with that our efficiency XXXX, And plan the are XXXX. well first coupled the the acquisition XX% leverage from impressive to certainly positive we XX% driving strategies scale carefully this operating under drove commitment full FirstMerit the and

very Our strong. credit metrics remain

ratio cycle XX basis each XXXX through net target remained charge-off been average provisions XX taken have excess below our to of the Our quality our demonstrating high range loss in six past charge-offs now for points. net the of of in Loan earnings. quarters

tangible top a Huntington on return as XX% Our regional common bank. positions performing equity

an to plan financial competitive drive as X with advantage an well two in previous momentum our XXXX positioned The and reduce investment advantages the Through disciplined across customer thoughtful acquisition, to upon businesses that build financial result plan and previous will the build for existing and from and introduced us easier with capabilities, plans improvement relationships Slide three-year performance bolster strengthened are plan deepen and our the initiatives new customers. in goal customers. experience. customer plans new our strategic at experience our of planned customer investments will capabilities in infrastructure that We extend industry our conference Further, our making our attrition strategic as and in of targets our XXXX businesses data execution, will November, provides faster enhancements a in digital, strategic our we intuitive, improve customer technology experience. Now our banking XXXX strategic process. key to customer continued industry leader some in designed and details is as our

Finally, to we capital retained priorities range. XX% including CETX our X% operating our

our current review and XXXX and Now economic discuss to to the X let’s environment expectations Slide in competitive turn markets. the

interest As the we year and outlook. of we are look recent mixed volatility, ahead, to market changing data cognizant economic rate

and period. the our views and with communicated economy. eliminated their leverage actions and taken our retail regions Recall capabilities risk and the to delegate and risk home change to equity portfolios as real such over Three bank well balloon the on and the risk focused appetite draw lines of our profile we’ve years, was commercial to at In We we management we ensure payments that very closely to this rather it de-risk leasing strengthen years that our disciplines. risk had it metrics. the we’ve as centralized of customers credit construction. auto working than meet credit and management enterprise estate, the back reacting management ago, We’re lending pulled on that of credit, end multi-family, requiring and specifically standard didn’t as wide set of products XXXX,

have these than We as And percentage capital, a today lower remained end. exposure of these disciplined XXXX in have year areas. all at of

of performance. opening is has the for growth. years. in is hearing decade, growth capital last we local The include targeted nation deliver consistency these to annual strong expenditures in tight metrics prime that believe already biggest good actions the economic detailed portfolios. expansions. fourth for including lending across consumers strong highest that slides data we labor generally our and markets business consumer activity in quarter. markets We years. all continue Businesses disclose plus us consumer And Our the the our hear data past we is underwriting nine issue the positive. the our constraining quarter, Midwest each where and perform what the a our We we’re of two prepared every loan to to origination customers detailed in to disclose cycles, customers job the Uniformly, rate have a had from investing economic GDP across the suggest well, period, well their The you quarter C&I are of have past in businesses

decades, Midwest And the some driving ongoing higher Further, was Consumer and disputes. in also these December inflation. and confidence the with have strong tariff the markets, nation businesses highest also a of remain in of than weathered the whole. as was wage trade second level two headwinds nearly upbeat consumers in labor

saw XX rates remain growth and footprint at XX November, ending our Additionally, in XX historic low the unemployment largest months of employment MSAs levels.

by bullish and that summarize our on saying I’d our footprint So we’re customers.

core core as expected as the of recent coming deepening average X%. of volatility, yield flattening tone year growth full from of acquiring in the X% In deposit is accounts checking to light focused range we as to the deposit year market be remain Reserve. the curve Federal loan expect also relationships. growth softer We the well X% X% average and on to Full

We hikes have two of in our removed rate the additional assumption XXXX forecast.

utilizing unchanged remain that growth now the expect purchase anticipated the in of last that X% flat given full on NIM as to GAAP to a offsets years. relatively of modest change basis we of X%. now XXXX year versus revenue expected annual the is Full benefit part accounting. the And expansion rates plan scenario several year same NIM assumptions, reduction for are core modeling our been has We in

With stated We for investments revenue X% planned non-interest priorities. expense a expect in paced in outlook, our X% the now change to consistent with our we’ve increase XXXX.

average our XX anticipate operating leverage positive XX We net continue remain of to in target target charge-offs basis the will below We XXXX. to range points. annual through-the-cycle

effective XX% tax XX.X% the rate XXXX in range. for expectation Our the is full year to

over overview to you So with year. provide for and performance turn that, it Mac, to an full to fourth the the quarter financial I’ll

Mac McCullough

Steve morning, per of everyone. earnings full Thanks, XXXX. up mentioned, We common the for $X.XX, highlights results. XXXX. are very provides our to pleased X with Slide XX% we year good the Steve reported and XXXX compared share

business relationships We and execution growth in continue of X% non-interest X% X%, deposit of loan in full and year core growth. solid expense, disciplined models lease customer a growth growth X% our revenue and average to core see decline driving

Please year-over-year the and return X.X%, comparisons ago up Return benefit and year per Tax $X.X Tangible during year full similar distinguish common tangible among common XXXX to increased X posted We on XX%. XX%. book even million by believe equity repurchases fourth value quarter ago of increased quarter. on that in Our substantial $XXX share was the fourth provides dividend the record the of return tax quarterly share the the highlights efficiency Huntington billion, revenue We X% of bank with ratio impacted all related on Federal quarter. XX% are the quarter assets regional year was Reform. was our Slide these versus $X.XX X% recognized metrics for equity three peers. financial to year. note was

see XX% $X.XX, year-over-year. momentum reported franchise. build share the across to common continue we per We As of earnings down

$XXX compared on million year were and earnings Excluding assets on equity interest accounting X.XX% partially tax a XX as increases on run-off or saw year-over-year common to basis. in and Return to on the share quarter, X.X%, XX% XX% offset benefit the $X.XX of ago an of of common was points the We was basis interest per purchase XX%. margin the result by return up was quarter, fourth and deposit XXXX the pricing tangible common return disciplined equity benefit accretion. adjusted net rate asset expansion of

Slide quarter fourth a of X% the the very XXXX. as earning average strength in portfolios. market. growth sheet Average reflecting from increase consumer XX% in broad-based X, X% an to a balance driven loans grew now quarter, the year-every-year, the as average good we include both This and growth by fourth in during had Turning was and loans increased well which loan leases, increase expansion residential Chicago mortgage commercial as officers into assets

weeks once X% disciplined final X% a finance typically year-over-year the loans increased of auto the $X.X again year-over-year. Midwest totaled the specialty We agency we in economy. quarter we jumbo the Originations mortgage reflecting are loan in increased down Average market, Average mortgages billion year-over-year saw products. loans asset middle As C&I centered corporate XX% ongoing retained and consistent during do, year, strength qualified and mortgage seeing the in the production heavy sold quarter annualized, production. activity banking. and C&I as X% with result linked we of

real mentioned, during our XX to the well-managed fourth loans optimize quarter money during previously with consistently Steve pay the year as returns up half our anticipated a on appropriate – expansion the pricing RV estate as quarter. Average states auto originations auto the on have increased year of XX% quarter we years. into loan from basis. strategic year-over-year, ensure estate over of on success tightening as new increased We yields we reflecting business As X.XX% well a averaging reflects and XXXX and on XXX basis second a marine year-over-year revenue. two points strategy we’re to real past pricing ago the basis of lending, the throughout Average new This linked down of our earlier commercial commercial mentioned X% loans capital. were downs X% the down executed

during were cash loans utilize left securities we to run-off higher X% flows year-over-year, and yielding portfolio Finally, as the fund the XXXX. down

X%. core X% Turning Average checking, DDA market. can our total of three year-over-year, a increased money We quarter, deposits while in deposits interest-bearing X% deposits. X% growth commercial the consumer from average XXX% deposits year-over-year, the interest noninterest-bearing decreased grew up deposits to primarily shift year now XX. Slide quarters ago reflecting products, from DDA DDA primarily of hybrid to initiatives checking including average XXXX. certificates Core interest-bearing customers during noninterest-bearing seem Average increase deposit first and to see balances were

in Average changing up money However, we X% as our X% preferences deposits consumer continue the shown growth on by grow households the actually consumer to deepen Slide relationships. higher of XX shifting increased year-over-year noninterest-bearing to market and driven appendix, year-over-year, yielding and customers balances products. deposits solid were commercial as in

see in can of our core quarters you deposit of As bottom has in increased the percentage the funding left page, a three row.

funding core in reduction borrowings. focus average resulted in Our year-over-year XX% a on short-term

Moving to Slide now XX.

pricing. and increase deposit loan ago average this million versus earning the Our net in in was our commercial quarter. yields, consumer X% $XX interest year income and higher or portfolios the increased assets, disciplined Driving X% growth both

up was quarter nine year quarter. basis up basis linked GAAP net margin points interest fourth for from points the and the Our quarter, XX X.XX% ago

Slide to Moving XX.

core Purchase in impact the net GAAP benefited was and from in accretion Slide interest seven regarding the interest and the information contributed ago in core up the ago interest points for points margin actual accounting XXXX fourth scheduled basis NIMs year XX than accounting points basis up for provides the quarter. XX purchase current FirstMerit and XXXX. the basis to to compared XX through quarter recoveries. points appendix of margin of net the normal basis X.XX%, the two commercial in Our quarter Both from the quarter. quarter, points fourth linked higher quarter year nine basis

As you considered less the are net line accounting to interest accounting will margin and material the and income statement of all bottom accretion see, becoming of is less purchase together. certainly purchase when the components

NIM a NIM purchase accounting. no reflects asset assuming expected XXXX, as to mentioned, is Steve on to offsets from versus costs certain XXXX, in modest GAAP of relatively increases the the flat The position. begin our also remain and basis As XXXX in anticipated expansion core further the the reduce NIM XXXX Fed reduction sensitivity to full-year benefit guidance

yields. asset earning to Turning

Our loan XX points. commercial increased basis loan increased year-over-year, yields consumer XX while basis yields points

deposits the basis year-over-year. cost total for up well XX year-over- basis deposit the basis points up year deposit deposits points paid remained quarter with of costs points commercial interest-bearing were core XX XX contained rate on Consumer were up XX points. Our basis core and

Slide Moving now to XX.

quarter our low beta expectations. XX% – Our cycle-to-date at remains which XXXX, deposit is beta below still fourth through well the of

you will We beginning the initiated communicating we on have us believe been slide. well our core here consumer time to that CD strategies at see that beginning and serve happen of over can the XXXX

we peer increased X% beta, increase our in while cumulative quarter only group saw a X%. the This

the ago our in couple comparisons rational overall for of have provides we last the mentioned non-interest income our quarters, pricing Slide markets. As the remains detail on deposit quarter XX year and to quarter.

points resulting of securities the Our fourth This X% billion securities by income approximately from Earlier incremental pickup risk. and rate restructuring duration incremental $X of yield the the by XXX almost modestly half credit the revenue The without was of the quarter portfolio first of basis run of quarterly line. million or driven with losses quarter $XX portfolio repositioning. remixed we million $XX in taking $X.X quarter fourth in quarter, primarily XXXX was for from and completed of the added million an approximately decline XXXX. non-interest decreased extending of fourth additional

of markets fee to as market year-over-year. payments and during $X fees seeing in we million consolidations Slide by million totaled $XX in of increase net positive Expenses facility of are spreads. closing of or capital acquisition our divestiture included retail $X Hutchinson, income XX the contributors Shockey fees the and all fees momentum The million banking expense the driven Mortgage $XX HSE and trust charges, Further, the million $XX including pressure results our management network. components year-over-year million as cards were related of investment see largest marketing also in XX% on three to down million quarter. of the service processing Erley related the income expense. branch strong was and the and capital branch continue XX% occupancy almost business highlights We $XX to of $X contributed deposit growth equipment expense demonstrated our secondary the expenses. in of and announcement quarter. versus momentum acquisition Wisconsin a by and to year-ago million higher

equity end, a we continued the that As our focused at on XX and we new These remain in XX Slide driven down equity more XX and while basis repurchase points basis basis environment. the we X.XX%, strength quarter To lost our X.XX%, tangible year-over-year strategic execute basis points down at one capital not ratios, our by tier XX in points disciplined ended control points expenses economic have in plan, share operating common into colleagues illustrates quarter four quarter. of to leverage activity. on common were making quarter. sheet investments the need and driving and positive balance of businesses. accelerated the sight uncertain year-over-year, linked growth linked declines

We our capital of XX% our bias with our X% will previously end guideline to – with the Slide CETX towards priorities. to illustrates within manage the XX upper continue articulated range. operating a

fund M&A. share including finally, repurchases everything selective support dividend; organic else cash second, and First, the and growth;

these priorities discipline. by underwriting maintaining loans Our profitability capital accordingly X% first, we us full-year execute allowed strong consistent and while management year-over-year in to on grew average XXXX.

During for $X.XX per XXXX, XX% common year. the share increased full to the we dividend by

the yield X.X%, dividend highest was the year of peer end in Our group.

shares. common a This up Finally, full-year during allowed that to million the that common would XXXX stock into year. A our we converted going $XXX repurchased ratio in process request of in XXXX a and total XXX%. the result set CCAR the we quarter, us of submit planning first to well Recall of million stock above preferred $XXX payout Series us

proposal of ratio XX%. of from forward have repurchases repurchases. to of volatility. in order long-term the stated we take we of payout our no ratio market the approximately advantage to We and XXXX of have quarter path fourth previously that allowed pull target common received payout This long-term during to quarter, a to the stock Reserve to a XX% target from dividend us adjust Federal end the in objection XX% fourth the

$XX.XX we cost during result, per a at an of repurchased common fourth the quarter, of share. $XXX As shares million average

share repurchase CCAR million have a of We remaining plan. $XXX capacity capital XXXX under

remains Consistent million prudent XX, financial in our is underwriting principles, in appetite. disciplined $XX Moving risk fourth risk credit our results reflect Huntington’s credit quality the saw. net on strong the expense quarter. to loss We to of booked moderate-to-low million. quarter strong core and Slide and of continue loss loan that one expense approach $XX the reflected of management provision our and in loan growth loan we provision aggregate the to quarter The charge-offs

of XX point charge-offs were up the basis in by and on the booked basis linked range Net portfolio quarter prior basis through advantage mix as The our one have points slides. level execution long-term. quarters sheet growth the for expense pre-tax, quadrant the consistent focused a positions XX year-ago the quarter We allowance of execute basis of X.XX%. loans There XX package of which us now non-performing Slide average from of cycle of points came to highlights our asset loans The as additional high-quality to XX the preprovision below Huntington’s to losses XX strong well-balanced result graph core the for loan to of represents our target provision growth Net XX loan rate net the on right, analyst shareholders chart points cycle lease is average strategy a At strategies. from charge-offs in to points. The and basis loss ratio deposit the an top our continued in return of and the capital X.XX% percentage decreased returns. quarter. represented granularity capital remains and loan revenue the provide points generation our illustrating over well up strong XX and the basis our portfolios. annualized above three charge-offs leases, earnings. to through charge-offs top and balance net and down left support on three position shareholder highlights while our

bank, balance the over and are a consumer the commercial believe We well both serve of sheet cycle. that the diversification and will us

DFAST. bottom rank risk disciplined stress enterprise highlight consistently commercial in the in top DFAST Our the left management. banks results severely the in test four scenario our We adverse

the bottom Huntington’s at strong capital Finally, demonstrates right, position.

back to turn can over so get mark, Let me your it to questions. we

Mark Muth

a she has if we to ask will only related Mac. you. your back peers, one Thank or ask additional that now questions. the Thanks, queue. and then that We take and add he courtesy each one as questions, person person Brenda, follow-up question themselves into can

Operator

Instructions]. [Operator

O’Neill. of first question Siefers Sandler from Scott Our is the line with

Scott Siefers

Good morning, Scott.

Scott Siefers

kind Mac, hoping on year. thoughts expand you the how on I a the little the throughout could was trajects of margin your core course of

the I was other points fourth like fourth full-year but the of done down it correctly, in some restructuring words, quarter. despite looks the in balance from think I’ve kind actions of interest flat quarter, imply recoveries couple guide of there would of here from sheet the to basis math benefit the in

see where but I’m you things sit? curious So, of would curious from course, playing you the environment, that given – how out mean be just understandable just I

Mac McCullough

Yes. Thanks, Scott.

build So unchanged budget. guidance with very we’ve that few to curve an our given over the guidance the we’ve rate unchanged we that rate the we’re move curve consistent is historically as to years, giving past used the as

you fourth two recoveries basically, – I interest quarter. over points of So, say the the capture normal basis would in

basis four So, additive points margin. adjust basis we’ll seven And basis margin related the to as to versus accretion, the points point. points purchase a XXXX accounting XXXX a then XXXX three lose it’s have actually for to you in full-year to starting that about

full likely four for or out the much taking historically the driven modestly, that we is also looking a curve. look took than just that flatter three two, So or matter in the fact for a the of point say this going NIM and XXXX. done I for year, the at that a basis core would it’s believing the increase to also that from shape by increases that the rate It’s there, we’ve and I when we’re and and impacted two of basis guidance of forecast talked the a NIM point both increase – the that’s we’ve think about

So, the those together. all bringing that components are

So again, kind of improving a and reported flat NIM modestly core NIM.

Scott Siefers

All be year. this out But fee I as you. perfect. NII you benefit as guess, the look And growth acquisition look you guide second driven the right, have to overall last to a year little the it’s them. then Okay. of you guess relatively of going main Thank we just I of momentum at revenue And the see more I know from income opposed half as year. as by drivers through fee that

Mac McCullough

script really service very in in markets we as continue impressively. continued households I improvements good build see momentum and we to good have the charges We capital also mentioned in deposit that

in the also card and line, in payments trust and good performance see fees. investment and also We management

good partially four lines. by banking those So, what we certainly, have quarter, in in but we across those see really good performance we mortgage categories, in other this momentum offset see

Scott Siefers

you Perfect. All very right, much. great. Thank

Mac McCullough

Scott. Thanks,

Operator

Our Jefferies. of the question Usdin with from next Ken line is

Ken Usdin

Mac. Hey,

Mac McCullough

Ken. Hey,

Ken Usdin

with two interest quarter, X.XX%. the recoveries, So fourth NIM that’s in was X.XX%

portfolio staying there knowing purchase especially is drop of six-basis not the So, the accretion then from with just I the run-off. sure the year, a and magnitude can that I’m sequentially, help you the rest you just there point the explain for mentioned understand of

down? such the and the what because us down help the bit step I drives positive – help – understand that negative, can just you us big kind from I parts a of more understand underlying, moving little step delta of can a but you don’t among the the get versus So

Mac McCullough

Yes.

We that cost on from forecast have XXXX. the also we’ve a it around some quarters. curve deposit the is impact budget first in of front-loaded in So to There we’re think and XXXX. the on is be going shape can modeled could assuming into for what I what the based – the maybe of I be incremental portion second do will in based

we to good As momentum and good a that in make short-term and reducing that we in continue of that to to keep position. We’ve our and see momentum across continue both want to done borrowings consumer, going. we deposits flow commercial sure stay good just we want job

it, think the it at about this, NIM this some all down about conservatism built points what there assuming full could core liability is do we way and in and about stay four thinking rate to thinking So year to what three environment increasing funded. cost also how just want the we’re the around the I point, be to basis to we’re comes core but thinking and about think to

Ken Usdin

that Do or the effect revenue business a Okay. And always then just GAAP, full-year gain on total inclusive FTE. follow-up sales from in it’s is a anything I also the either revenue of base? of removing guide, the understand the on which branch guide, Thanks. then your you but include total – a on the from

Mac McCullough

Yes.

that that of net in you impact XX form the and revenue no you certainly the income. that about about is and branch when we sale to There’s So there’s of consolidations the have the Wisconsin doubt think going from come branches. of most interest think impact

impacts in factored there we but really have we no And up. into at are right, look an XXXX FTE you’re So XXXX. basis, those on to other it adjustments speak

Ken Usdin

Okay.

Mac McCullough

Okay?

Ken Usdin

Yes.

So baked there that as is well? into no gain

Mac McCullough

is on any into there XXXX. these of numbers sale gain no for baked Yes,

Ken Usdin

Understood.

Mac. Thank Okay. you,

Mac McCullough

you. Thank

Operator

from the Zerbe of is with question Stanley. next line Ken Our Morgan

Ken Zerbe

Great Thanks.

Mac McCullough

Ken. Hey,

Ken Zerbe

in a you on that really I building basis. guys pretty Sorry margin. to another just want is are quick on ask drop to core that is a steep question be

So, X.XX%, basis go get two it. from the points, if X.XX% we I excluding

it step at You first say that course this get your is deposit the cost is going be gradual in your full-year quarter guidance, year? down a specifically over front-loaded. we of looking the just or meaningful of I mean, are reduction to more

Mac McCullough

reduction report it the the of would adjusting for definitely points quarter, over the and basis as two be even recoveries. primarily a the say that interest Yes, over the the in would course NIM be normal core would gradual fourth year I

a core the see in the first quarter could in NIM. step-up You

that recoveries purchase would the is really of the impacting it So, impact be reported accounting the and interest the NIM. impact of

here drop not talking quarter. huge points, basis first we’re and that about should to of changes that we’re to explain talking either, but So, help quarter some about fourth

Ken Zerbe

you. Got it does, does. It

– So of the end the your reported seems year, XXXX. to then pick sort like is That by into way I I of your right number, heading mean plus think about NIM maybe it. the cost a X.XX%

Mac McCullough

unreasonable. not that’s Yes,

Ken Zerbe

Got it.

then impact you and there you’re of might bit sort you position And specifically if Can your in to talk dollar how NII? your terms Thanks. of reduce a more sorry, question, Okay. asset much doing just help about sensitive little follow-up that what is will.

Mac McCullough

Yes.

what at of now floors. right money we’re looking interest rate be out So would the

rate You securities add might is reduce of investment cost money interest we’re to scheme also the slight floors, based right we’re based significant the see about some unfolds. Overall, now. some think asset way of there sensitivity. we out that not But additional how on to the position thinking that XXXX of it evaluate continuing things us but upon in a to that

You could we’re actions we’re and see positioned with asset how us comfortable further the position, sensitivity we’re taking. right that now reduce but that

Ken Zerbe

Perfect. Thank right. you. All

Mac McCullough

you. Thank

Operator

Our John ISI. next Pancari Evercore is question of from with line the

Steve Steinour

Good morning, John.

Mac McCullough

Hi, John.

John Pancari

dialing assuming plans from X% the maintained just Good and your X% to like target some flatter everything, your despite XXXX removing seems and morning. assuming a Fed curve On hedging of your you assumptions and long-term I��m of hikes long-term everything. goals, revenue this and in

do the higher mid high in to come that mean the of in you end? of attainability the terms revenue have Or does in long-term expectation or X%? of at still end confidence you degree that lower So of X% can a

Mac McCullough

Yes, John, its Mac.

this. we do industry the perspective typically the X% think with we range XXXX to have down, there we that comfortable the about have that or put a high-end So we’ve out X% we put at earn into the low-end it in When X% revenue. November as with disclosed we – revenue conference. and feel range put we feel out But built from at this, X% very an a some conservatism for probably at was did like to we we out. range bring it comfortable that We

fundamental what a you I the growth that tell the of out see the rate what made that changes sheet impact and about from income from the Steve see haven’t So would we balance we perspective, reflect talked any certainly based to increases forecast. economy But from really of hearing what our we’re customers. Midwest the we upon fee would coming that strength

end down X% expense environment expense drive the the guidance that to just fact got we’ve continue the on to did to by take operating leverage. in also this either a recognizing We outlook the manage the and positive revenue fit

the we impact that out in revenue again, feel ranges entirely with due outlook. very change So put the and, to rate the we is comfortable the

John Pancari

Got it.

you want to looks just the I see if in And what like more can you give then thanks. big little of kind – us can pretty ratio to lending any dollar that credit XX went XX around separately know million $XX day a jump ask I you wanted if a indicated not in $XX And charge-offs, C&I, – XX bit want XX%, big Okay, on bps, separately, for C&I to that it increase color type more you jump leverage there? have in still the industries increase, in just get there’s any million from but wise. I the of just delinquencies XX color the at to ratio, so then there your if and

get Thanks. So color some want there? to

Steve Steinour

Sure.

So the just in of terms charge-offs.

a it’s point level. important operating very low out obviously we’re I at think to that

commercial book entire we I last the $XX the C&I in in charge-offs think year, estate. So total real of that’s commercial million took and

net set just in last commercial recoveries book. of entire had So the kind actually level there, we to quarter,

in low. no all There are no larger million. leverage $X different They that So numbers the were million. for one had last certainly We the any so quarter one in no because million, aren’t leveraged We $X industries. had charge-off than lending, in terms for $X concentrations, of there population. in are loans

and – charge-offs the up. that’s fourth generally, there they bump So you that’s year-over-year points largely are to consistent, due that delinquencies to if XX charge-offs loans in you’ll quarter and terms are very consumer and XX see of basis look our fact the

so – commercial on That’s the that here. a you on on concerns so from over no may standpoint, all. over there, and delinquencies we trend XX the or then think not we’ve the what So that’s deal that’s the got the delinquencies, can of single I that have charge-offs. hit numbers going days And indicator any are story moves at

John Pancari

you. Thank Okay.

Operator

next line with Our question Wedbush. Peter Winter is of from the

Peter Winter

morning. Good

Steve Steinour

Good Peter. morning,

Peter Winter

lot quarter think Obviously conditions fourth ask mortgage banking. close we the a pressure. to market given to about being should I the But wanted of under about bottoming here?

Mac McCullough

So, from mortgage well originators also, Peter, at marketing, And – volume high performed depend a very from where in we’ve it’s talent perspective for mortgage as actually going would performing at level. across on really that’s been We’ve market Chicago pressure we’ve point entire the to franchise the the with we a end a up secondary perspective. the year. upgraded say I added the

marketing of XXXX the we a in the and just our go So we’re how from that comfortable feel comfortable for managing secondary business. where and position in-depth from here. completed feel the on business with with depends But business very very we health analysis it

Peter Winter

portfolio. about off Okay. you And and add XXXX, just could for In the securities follow-up I Mac, sensitivity? as – the funding of to guess then ran on I if growth to loan said actually might you partly, comments securities kind asset it as then of reduce your you

Mac McCullough

Yes.

Peter Winter

the just the and little XXXX what grow you about portfolio actually deposits so bit that core a reliance see it. to – to about on expect talk more just should way think we Can

Mac McCullough

aggressive manage that’s bit to back Yes. as Peter, more reinvest maybe to start our if we little building portfolio get sensitivity. the portfolio are asset to decide so as we best the a going the into in flow cash well XXXX action in

to a grow mortgage those see in did balance still us we as did hedge degree start sheet to assets that let that to with resi use portfolio the certain you’ll down and but on you we XXXX kept that asset that. extent. see But we could XXXX, So which the is the run we a consideration, in sensitivity replace under portfolio against

Peter Winter

Mac. Thanks,

Mac McCullough

Thanks, Yes. Peter.

Operator

Mosby next the question with of is Sparks. from Marty Vining line Our

Marty Mosby

Morning.

Steve Steinour

Marty. Hi,

Mac McCullough

Hi, Marty.

Marty Mosby

I back combine want go recognized. which don’t interest being pretty to as we net margin, I look allowance had do hard. building this with coverage that been the is hammer your to that, want I What side, Mac, PAA other at we’ve that you’ve is, One this is, two is when questions. to the of details

regular comes of shift a over it between natural and out kind of then put a kind the that’s it’s it loan also back and there you just becomes So then into and and it PAA the build.

offset. So kind of there is natural a

of You’ve average in million had XXXX. your quarter each build through in $XX allowance

lot So so natural accretion, here communicated much some to in impact. really a to allowance purchase just accounting the compensate that’s there you of offset, wondering, have that build don’t kind is just your getting is because compression margin for a that the of as helps of

Mac McCullough

Yes, Marty.

of the pretty in well that XXXX. XX up where that, that the Slide lay XXXX, you full we for impact accounting minus for loss we’re or a year actually is can see on think deck, overall I anticipating $X purchase million

we’re in on we So you for we XX, are expense to as see seeing first come the to still still some come to we’re to XXXX. the allowance related Slide the accretion what add accounting we can bit down, have We since that. provision need through portfolio a to FirstMerit But FirstMerit seeing anticipate down go. cycling

line, of less in and but impact becoming together PAA things impact think the that I an have XXXX, play have the the less bottom does is slide and still how these on does material clearly this impact. margin So we’ll but all certainly on layout

Marty Mosby

still to as because it’s what comes it less FirstMerit And still down there’s the just build in well, the the build is XXXX. also need PAA, was guess than I kind some for some less, of but there’s

Mac McCullough

That correct. would absolutely be

Marty Mosby

Steve, then equity almost your something vesting And of a threw there kind early you this in members like of of on for positions team. till retirement Okay. about

you in look why that kind was employees way the how to curious about of at how you highlighted ownership? culture think Just a and envision equity that, chose you that affects

Steve Steinour

track, may clear the X,XXX its in position to made hold shares as are not colleagues we XXXX separate to that are and have totally a hold been retirement with we with where and company segregated did think it shareholders’ risk account to and that a in And equity but retirement the we’ve overtime the of management management in some of consequence. – with credit put colleagues we to it board, our but and granted, this for continue of the a in we gets And time over especially company we third-party. interests. greater it Marty, these focus aligns believe net in we the a a on percentage past, change into I seen So across what accumulated have it believe with tax the throughout requirement

group largest XXXX, of of this a game So we off generally XXX the as result there’s skin definitely position shareholder year. every top grants were in seventh made growing as with with – the a a and equity today not the we shareholder,

to change that and sure your So board between fundamental cycles. very the answers there philosophy overtime question? alignment shareholders the Is that to XXXX recommended in back and through in change by going supportive we make making management and complete is

Marty Mosby

that would a it and be did amount portion there’s XXX%, It set not but a aside, actually that’s vested or was at retirement.

Steve Steinour

ceiling. of Its there granted and no to is net taxes XX% of XX% equity

So compounds. it

Marty Mosby

and impactful seventh No, that all of holder interesting. not shareholder – angle thought industrially so that’s and that’s that an great the very as I about was

So thanks.

Steve Steinour

you. Thank

Operator

the BMO. Lana Our with of next Chan question comes from line

Lana Chan

morning. Good

Steve Steinour

Hey, Lana.

Mac McCullough

Good morning.

Lana Chan

also with you’re I quarter? bigger moving seeing new competition what there just of any like is recent question comments about into first – some the seems about It competition. any non-bank changes banks and your some markets in

Steve Steinour

banks a points of expanding Lana, we competition through monitor number no Steve. non-bank and the different separately, of from have into lot change footprint. this We what see. is we larger banks very very, some is of remains a can we large muted banks, data But quarter-to-quarter here. then already have essentially And impacts

here presence in terms one in bank, very, JPM employees. Columbus, BBVA old very Michigan. in large of Chase in is Columbus the see So We

here have to and already compete – targeted years do we economy the we’ve going there over or somewhat what’s investments But in to in banks and are to we adequately of okay the on We’d that. a expect strategies – there Midwest. clearly show focus. Midwest a Actually, time. to see an focus, disinvestment large recognize and continue that the presence some sense. managed a from years some to positive and that that view recent was successfully in our is region as it’s So through affirmation The for and

Lana Chan

Okay, thank capital. second around the was you. And question

targeting TCE to in the ratios of way the wondering a of look on upper binding to CETX capital – to terms prior crisis TA at there school that end XX% X% at the ratio of that to constraint the the the Just look you old range. financial used sort Is ratio? we at also

Mac McCullough

have we goals primary monitor investment of we gap look we constraint and quite bit CETX. we’ve process at a TCE do do of do our think the carefully ratio of CETX makeup portfolio a because between common security and and size CETX that of investment about as our the equity we tangible to larger And Lana, CCAR the what Yes, around. that is security take a relative portfolio. set and

So at and against. go the is with this CETX but measure we’re TCE, level, measure comfortable we that basically

Lana Chan

Okay. Mac. Thanks,

Mac McCullough

Thank you.

Operator

Arfstrom with RBC. Our next question line from Jon of is the

Jon Arfstrom

morning. Good Thanks. Great.

Steve Steinour

Good morning, Jon.

Jon Arfstrom

any like your lending than Or that new from a be labor you’ve customers anything concerns? sounds the curious little just different Steve, you’re in previous maybe quarters? for – and but a economy, in if It causes that quick bit anything heard what talk one might hearing just you. optimistic the issue, I’m about you you’re you

Steve Steinour

since it any of what and time at Jon, expect, customer is in of this some both market ways least way not impacts tariffs very, as but any at we’ve XX impacted volatility point, the are on get volatility the this has days outreach are a here. market There done than we’d I’ve at very benign. the point sense impacted the The outlook. material at more to their companies has plans in last the and been or so

times I out into others the year a And backlogs of pipelines commitments growth, expectation next call, to is think well or maybe we have lead the that last contractors companies has are committed. that’s shared was continued these XXXX. that in get – are I with group there long So with and XXXX,

locked deliver In of some is the in benefiting, they these can extended, that competitive so getting in this opportunity dynamics fact tightness them that the duration a seen. just of longer it’s so fact, labor they’ve is industries, giving of again, a

Jon Arfstrom

numbers, big expense expense terms these good. in your change you, us out we does the you do give – bit that of idea change spending guidance and of of couple go? an some types helps. Can where you a by growth question on by Okay, projects might your the a and hikes, but in plans get you Thank And that of basically give again revenue aren’t a side. taking of if us delay rates the can more would that then money

Steve Steinour

consolidations off the end Sure. we the that year reinvestment amount the and of of sale branch and the fair coming Jon, were of are of have completed a completed Wisconsin. around

data And amount a of fair so and we’re investment digital, self-funding other in technology.

prior in from on of markets analyst In addition side pace private to away not banking, pacing and an a the rate revenue, investment out investment like we’ll thing. of is we’re in this expansions We’ll capital calls and to to it walk match of businesses about was banking these. sessions, the particular. in the building so a fee expected going business just quarterly the of talked This number we’ve banking, commercial and pace you’ll our and groups rate see some our revenue the

but it of see rates the we’re as would the to economy interest if pace high-end look other some So we’ll way or come to or we’ll with add the we moderate we the continue our reasons it, in it or level where – of beyond generating for outlook. revenue manage other accelerate that range, investments,

Jon Arfstrom

Okay, you. all right. Thank

Steve Steinour

you. Thank

Operator

with next comes Kevin line from Barker Piper Jaffray. of question Our the

Steve Steinour

Good Kevin. morning,

Kevin Barker

strong just capital pipeline markets you mentioned really to the follow-up, morning. I want Good . was

a be come the today where but you into quarter could fourth $XX in half look first see really the good half. and some had down when to from it back have XXXX, million do run the then rate in quarter, and there, You you seasonality the in you accelerate expected

the Just color some give capital side? market on us

Mac McCullough

Mac. Kevin, So its

expect people first a business markets We’ve little support interact made lending we they high will have executing think level to it I year capital at the to in team the when progresses. of be, as and some, we do smart quarter, and how really investments usually into revenue the bit that comes it that slower increase but So it’s a and on groups. very some

Steve Steinour

Well fourth the with we are as pipelines of sort the quarter third, year enter consistent pipeline.

addition we’re over expecting strength capabilities. us carry from have and we the we investments lot gives first pipeline volumes So And the capital additional markets some of the pipeline our move – as of of – in half that the the reasonable so year and customer the activity to focused. a the continued that confidence is again, forward C&I,

Kevin Barker

And in $X branch the the you million consolidation on then side, $XX equipment. you and out the had follow-up the million expense called in

growth lower be associated into with XXXX So be equipment due investments, or basis we significantly other X% to to of in assume GAAP expense the a run going will portions salaries the maybe on X% and occupancy to and then primarily the rate business.

Mac McCullough

the And corporate some the think out of expenses right or look way fourth in kind Yes, to taken facilities the the Kevin, related to XX I that that we’ve that’s at took Steve branches the run a Wisconsin consolidation. mentioned think take of it, we’re about investments the see to facilities. as related definitely we actions we’ll that branch quarter reduced rates and we doing

to would personnel anything it, we’re relates expect So lines typical certainly development. XXXX and investing with would it comfortable be we’re how you to in and in a see that technology

would would look growth, I nothing I areas that of ordinary. that, those for out the beyond So the are say but

Kevin Barker

Okay. Thank you.

Mac McCullough

Kevin. Thanks,

Operator

O’Connor with is Deutsche of question Bank. from line the next Our Matt

Matt O’Connor

us then was on strategic further And going the that just if – you’re longer obviously do, but from not I divestitures? you some of what be as and think just to morning. thoughts there to interesting? term then or franchise could you further might any whether bigger wondering a that tinkering course, accurately deals be is opportunities view, strategic bolt-on its Good point tell of

Mac McCullough

about So, Matt, focused core you is we’re I probably things and banking focused talked less Finance. franchises, always we’ve that what Equipment looking or around HSE at tell on historically will on we’re maybe opportunities and as like more Macquarie

something but terms businesses the that can acquired opportunities very we’re at or we bring we an of perspective, from and looking already at we think So, price. anything our like have that attractive looking that with us that we’re but talent. position we’re find an Those for we’ve businesses think out that M&A I it’s that haven’t in helps comfortable not in we additional HSE we’re Macquarie and in attractive what particular, are very stopped capabilities in, to a very strengthen

said, in going that expect be like doing always looking, anything. I but So we’re market, to we’re I a wouldn’t this if lot

Steve Steinour

We seen think, as we the can improve that as the core performance financial you’ve well. metrics in long-term

And the so drive that’s focus the core.

Matt O’Connor

that will as bigger feel to need you we something get of long-term? more more medium maybe on thoughts scale out look just you kind then like more scale, And do you

Mac McCullough

comfortable So we’re how right positioned we’re with now.

the been deposit the Steve FirstMerit transaction ratio think was us scale doing in to be in We’ve going out, cycle core a this in upon pretty perspective. direct from it’s valuations the I efficiency to point the cycle. saying call. that and earlier a extremely improvement pointed at we’re this expectations, this the in unlikely at based beneficial very in and franchise the that point

far So very, of them. said, I like very between, are unlikely can but when good find opportunities and we that things the math few specialty and on focused some we’re

Matt O’Connor

you. thank Okay,

Mac McCullough

Yes. Thanks, Matt.

Operator

of session. remarks. Ladies to call and we’ve gentlemen, for Steinour question-and-answer reached the like end Steve to the the back I’d closing turn

Steve Steinour

five time of implemented on XXXX by was all first the XXXX highlighted GAAP financial long-term goals the our a for with achievement strategic basis. plan of the

our experience, strategic bar while shareholders. spill of our earnings core produce strategies the over years company with to initiatives commences ourselves focused of seen. execution our businesses really that and we consistent in the that strategic the will the once same. We’ve year our plan. high-quality We’re The pleased the involves plan XXXX the will the you’ve important that. returns believe attractive new again, improve And three-year the remain raised as investments for customer first

market to and wallet our continue products, We share customer gain expect distinctive through superior differentiated and share grow service. brand to

and between that risk over we’ve years. look management a XXXX built there’s see high into of three appropriately we next momentum our and shareholders. Board, management, largest driving this the are long-term the of So Huntington performance. set We the shareholder as us, finally, Board sustained colleagues focused forward And us of beyond. seventh level to our colleagues initiatives on carrying lower are and and all a collectively the all alignment our The of of

Huntington. We today joining your us for great interest you in and have thank appreciate day. So a you

Operator

concludes This you. today’s Thank teleconference.

this at may your You lines you time, and disconnect for thank your participation.

Huntington Bancshares (HBAN) 24 Jan 192018 Q4 Earnings call transcript