HBAN - Earnings call transcript Q3 2019 | Huntington Bancshares Incorporated

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Operator

Greetings and welcome to the Huntington Bancshares Third Quarter Earnings Call. At this time all participants are in a listen-only mode. [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.

begin. may You

Mark Muth

our Welcome. for Sherri. reviewing Muth, of section Director be Thank Copies I'm of Relations of Relations Investor Huntington. on be www.huntington.com. the Investor found you, the Mark website, slides can we'll

be This rebroadcast as the of starting and from a the hour available call. call one recorded is close being will about

presenters Steve Steinour, Officer. McCullough, and Officer; Financial Chief are Chairman, Credit Mac Today’s Rich Chief President and Pohle, CEO;

statements. subject Q&A As statements noted at today's X, on to will and are which Such on risks differ forward-looking information discussion, including based results uncertainties, period, this contain the cause time to Slide assumptions and actual materially. may available and changes, are

no statements. update such obligation assume to We

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

over he now Steve me start Let to it Slide on turn X. and will

Steve Steinour

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

solid We appreciate we the a always, As continued challenging momentum operating with bank a your and across despite environment. and support. we're pleased the had third interest quarter

are bank businesses economy for quality supporting continue the throughout a growth. organic interest while growth. positioning build our strong weaker and Overall, well we with remains to been We've environment rate organic for capital performing a the disciplined Credit lower and year.

cautious volatility. delivering Our global economic efforts being increased are capital given quartile our through top a bank as cycle consistent of the returns. risks signals regional strategies as mixed with were with our and high-performing well shareholder We and creating global liquidity

Company strong top perform and consumers the labor are Across continue with driving the to board we're of wage markets, our remember and shareholders. our Please collectively shareholders footprint among management required well inflation. long-term XX

of ending Indiana, in MSAs Huntington's most the August and of unemployment markets. XX to appreciate solid declined states. the unemployment increases Home Michigan, largest especially XX with levels continue footprint Job in in exceeded our prices XXXX, XX rates openings in months In Ohio.

in since confidence at generally highest consumer region our has stayed the levels Additionally, XXXX.

of more growth has slightly slowed. On that the adopted view business local side, recognizing economies a cautious the we've economic

We've the is more some the with tone growth manufacturing around impacted economic our global along customers trade economic recently consistent commercial primarily markets of seen loan in constraining labor Near-term activity sector. footprint. from investment. the outlook national The in slowdown and commercial a with uncertainty the in measured and our tight has uncertainty

Fundamental sector from footprint occurring potential Michigan technology, Our virtually customers and generally industries services. long-term with long-term their has services financial business multiple in are high, is economies. performance year. and in a which recent are state growing strong research. employment confident Ohio benefiting services, healthcare growth professional is example, all about evident financial, growth this improvements including for in

growth are reduce commercial fourth current environment visibility loan the for the quarter our more The of we’ve pipeline and the about good, outlook growth. in fourth prevailing we XXXX. additional action in cuts, expense cautious taken interest more In operating for the rate challenging light quarter future though to remains the

of elimination about existing drive completed productivity. XXX internal the an to recently including positions We've reorganization better

our investments, technology agile in effective enhancing customer which allowed are build on and efficient the experience. development addition, more In more have of become to our out focused us capabilities

despite the to digital position additional an and expectation actions further in reductions. well technology These bank invest to of continue perform rate

operating leverage XXXX. positive projecting are in We

in we a As not near-term. do this recession the foresee year, times we've stated several

headwinds. risk Our to withstand capital core moderate-to-low position earnings our aggregate power, and strategies economic long-term strong us appetite

these situations. do recession, of bring And bring recognize consistent a have to of opportunities. also drive designed across not we, the it's to a challenges, performance I've record only while economic are cycles. not downturns as strong more foresee And strategies term said, we do Our we near important taking advantage they

two XXXX For back we and key auto in later others small these success. in and these of pulling XXXX businesses are example, and XX-years when expanded lending, and stepped groups from business drivers were Huntington’s

was for second number row now for the a decade. operates nation one in year SBA, in and our the Huntington States lender and bank auto Similarly, auto we've X(NYSE:A) finance last year than in largest the XX the footprint in our tenth business more now a been largest we're lender.

value. over We're shareholder we to time, economy and the for Also which banking, a our positioned in ability but disruptive to more long-term banking confident the Fair past continue introduced and Play I'm at build in consumer has controversial decade. was fueled quite challenging XXXX growth our

Now, announcement I Zach next Wasserman us highlight before our from in as CFO. Visa will joining be that Mac, it November over I want our to to turn last week early

you As Mac at year he'll year-end. retiring this announced be know all earlier

So accomplishments I to this earnings enormous call conference before Mac’s him moment his to many and his wanted to a for final is retirement. thank Huntington. take contributions

in instrumental the we've in and Mac current of largest Mac’s long-term set. financial for integration heightened of and FirstMerit original on successfully our discipline Under the co-lead the now and established executive the in our organization. are which delivered XXXX throughout the metrics culture leadership, was strategic acquisition He the history. acquisition set was our a financial working exceeded

economic He well has to positioned all bank the perform cycles. through

the of to certainly extremely company. behalf board, Mac to like and our for we're colleagues his grateful contributions thank on our So as shareholders our

So now to me that halo, of the you provide ask overview Mac performance. let with financial

Mac McCullough

to call much me welcome is Well the you who the kind know over the relationship Steve. sure And Zack, let to three say, call. I'm enjoyed for the you good. everyone to to community just on investment with last thank the Very I've Good decades. morning those listening how And today. words, want let I

opportunities friendships as we've and developed the learning well. I I've the appreciate that appreciated

So thank you very much.

look turn Slide Let's to and quarter. third a take X at the

decrease ago of reported solid growth per X% X% share. $X.XX share have a per We book double-digit in million, of common income So of the a growth net of year-over-year. share we $XXX with year We up strong tangible and value reflected earnings momentum revenue and earnings rate versus earnings per recorded quarter.

Tangible XX% XX%. tangible was and on book XX% was year-over-year per equity on was was on $X.XX common X.X%, assets common increase. return value equity share a Return return common

efficiency ratio credits, was revenue quarter more in deposits year-over-year for from X% Average X% core a Total result in Net provide on increased increased charge two as later year XX.X% and Our year-over-year. average year-over-year. will down quarter modestly X% this increased detail XX.X% the quarter. ago commercial loans the increased offs call. Rich of which the

Even strong. points these XX through to remains of net charge basis near offs range the quality points. basis average items, credit of Overall cycle XX target our low-end were with the

quarter the which given problem in As loans low very we volatility have at to previously levels noted, we loss are some operating. we quarter expect

loans to and a Slide now billion increased X% increased Turning the or compared billion loans quarter. year-over-year consumer or in assets X% $X.X X, X% or commercial loans. average including ago $X.X increase $X.X and to increase year leases in a billion $X.X billion X% earning to or Average

commercial increased notable dealer reflected Average X% growth banking, of and the C&I has ago component year-over-year growth industrial and floorplan asset growth. past been loans loan loan year in well-diversified largest from our year with the finance. corporate and the quarter over

media current see to levels, portfolio reflecting and verticals as our year-over-year loans the lending in actively manage also XXXX We technology, average mid good plan. specialty lending, part a announced corporate of we continue commercial we finance, real around our with continue strategic of estate which Alternatively, telecom CRE new and X% practice to traction decrease.

in well-managed is centered The manage our tightening loan these lending CRE remain pay ensure the and Consumer and growth on businesses marine downs of of capital reflecting the expansion strategic two two as to an the appropriate as past years. over mortgage RV decrease output risk. of portfolios well returns to and residential

loans year-over-year. XX% Average residential mortgage increased

qualified in quarter jumbo typically mortgages and retained mortgage we products. and As mortgage we specialty the do, sold the production agency

loans XX business. half and of Average share marine increased year-over-year year-over-year we RV XXXX as the to auto we loan the first executed XXXX. X% optimization this decreased gain and as state auto continue a loans and the of footprint market in strategy across Average result XX% pricing traction for

impact. helped revenue minimizing has optimization sheet maximize Pricing balance us while

we our intentionally pricing lowered However, given in drive in auto interest the rate increased the quarter third the changes to production. outlook,

current lower in auto We push future cuts are assets higher fixed-rate before locking yields term that are year. yields rate short next loan anticipated duration,

that important super the driving totaled FICO and maintaining quarter billion up $X.X underwriting It versus consistent score prime ago discipline. and average our to we are our customer Auto increased XX% the year above quarter production while the focus note is in an XXX. had originations

year-over-year. of June the Turning now increased deposits of approximately sale average X, network deposits average of that year-over-year, branch this retail deposits X% Note that increased sold we $XXX while was core part Slide constant in as to million core year. X% total

accounts market shift the away increased consumer year-over-year, pricing Average money in to money reflecting deposits from XX% mid-XXXX. market in CDs promotional primarily

the Core initiatives certificates increased quarter from noninterest-bearing were while decreased primarily the the X%. during X% of DDA deposits year-over-year. deposits consumer average ago growth flat DDA increased demand deposits quarter, XXXX. deposits CD of year third total year-over-year, XX% Average Average interest-bearing reflecting

consumer As shown X% year-over-year. very the deposits appendix, our Slide noninterest-bearing on we that XX pleased increased are in

primarily balances noninterest-bearing domestic DDA decreased to We continue and money product reflecting mix. to from checking, products, in interest primarily other commercial savings XX%, our consumer and continued hybrid see customers deposits Average shift market. interest-bearing a shift checking

interest assets. Net XX XX on was million points in interest offset ago decreased quarter interest basis down the down margin, year increase Moving the the quarter, quarter, to basis points XX $X primarily by earning by FTE X.XX% and margin the basis in versus decline net X% average partially or X. the net Slide from income year driven ago X% for linked-quarter. points

core Purchase net interest basis compared X.XX%, XX XXXX the quarter, appendix basis points to in down Moving XXXX. accretion the and to the for in interest points Slide contributed accounting in FirstMerit four actual year third information quarter purchase to the basis for quarter. the the year quarter. margin ago regarding our X, scheduled points current margin impact of ago provides seven and Slide nine the net from accounting was

to Turning yields. earning the asset

basis one yields yields basis point. Our commercial loan five points. basis increased increased loan yields year-over-year, points Security XX while consumer decreased

XX basis interest-bearing for contained one points year-over-year points costs point remained and basis up deposit on deposits rate paid up sequentially. basis quarter, Our the XX well with only the total of

total interest-bearing Our July since. every deposit moved in and peaks month lower have costs

hedges we the lower asset reduce swaps and the risk to interest implemented summarizes floors. hedging incremental X strategy have incremental both downside Slide rates. The include from

the implementation completed substantially of now have incremental We hedges.

will other important you the that should since the interest also continue factors program balance the to late guidance rate of fully fine-tune sheet mix hedging as has in necessitate. overall the been environment, to cost our we as reflected expect, XXXX. hedging However, It's remember and program

loan balances bank deposit of the CDs with the for consumer and The slide repricing of left reduce graphs of money and our in XXXX provide opportunity well-timed, lower. to portfolio of the second mix as half bottom provides the the market higher XXXX. significant events This these as half and priced the as of detail the on first the promotional repriced cost an deposits accounts well

repricing activity fourth Through of the of September, to pick is in on XXXX. lower see the quarter, we quarter deposit beginning the track, the impact deposit timing, given the this consumer in costs fourth maturing although the expect up balances

On reductions, and to rate rate for client-specific the are our the to the quickly any developed commercial to deposits. cuts with cost strategy react tactics same we've any cuts. September future implement side following the and with were the highest of particularly very business, results pleased rate among We ready rate July cuts

XX%, quarter. current provides well rate, managements income $X on net Mortgage on our spreads ago as reflecting year quarter. gain detail higher origination an primarily XX% which the secondary volume risk in favorable from increased as noninterest XX Slide banking market million servicing income increased and mortgage the

quarter, core quarter reflecting Capital markets XX% primarily Hutchinson, ago and the in fourth business Shockey growth. acquisition of XXXX and fees increased continued the the Erley year versus of

card We largest service our posted income contributors momentum fees both see noninterest deposit continue and positive processing and payment as within year-over-year growth. to to two charges

related Personnel hiring addition of XX nearly experienced in noninterest strategic the our the year-over-year of areas digital verticals. the the provides costs a composition colleagues, X% new technology in shift of X%, in the initiatives and Slide colleagues and XXX of plan increased reflecting to growth components the our XXXX including in expense. lending primarily bankers

of ongoing of XXXX personnel increasing May expense benefit year-over-year, driven in Partially increased by XX% the investment expense of year-over-year XXXX, surcharge the technology Further implementation offsetting decreased discontinuation the processing costs. quarter other expense the Outside increased insurance deposit decreased annual other in costs. XX% data and increases, with due fourth of FDIC to other these and services and merit XX%. while increases

tangible continued and remain quarter driving We from ratios, up illustrates a leverage focused common ended our Slide ago the at the year the basis points XX capital operating XX quarter. in equity X%, ratio on strength TCE positive XXXX of XXXX. or

XX.XX%, Tier XX ended For basis quarter the ratio X points the common at up XX points linked-quarter. equity and basis year-over-year up

XX% manage the to CETX our high-end of continue to operating We X% guidelines. to

third total of repurchased common million we the stock. During an a $XX share of of shares average XXXX, common or of $XX.XX cost X.X quarter at per million

Slide XX look provides CECL. our thinking current a at around

implementation time, estimate ACL credit in of continue to we CECL or our XXXX. We range losses progress At towards will current levels. from allowance XX% for a to XX% this in increase

our longer Given in The than XX% portfolio. a predominantly has dated allowance of higher increase the the loss in loan the results expected reserves consumer current CECL mix loss correlated relatively loans, consumer much methodology lifetime methodology. to

quarter buyback our worked we this CECL. reduced through We expected of the as impact

to our costs, CETX to basis commitment reinforce position the by strength repurchase the share a to back the our These but organization. implemented level, use capital next fully ratios strong actions which a to year. our post-CECL plan we end we XX% maintaining of our as forward, manage see capital Going capital of for

As our buyback cash the support and capital other not dividends are: selective all and we previously second, capital to instances including many fund capital growth; have acquisitions. uses organic first, have These to the changed. priorities priorities on finally, communicated

Let trends credit to turn it for the to Rich? Rich the me quarter. now cover over

Rich Pohle

financial provides management strong. snapshot core key Consistent to aggregate and to risk which disciplined metrics moderate-to-low one and appetite. Huntington's approach Thanks a for is of our continue credit remains reflect underwriting Mac. the principles XX credit prudent our Slide risk quality of quarter results our

relationships We and the third current Net provision loans charge-offs XX net The expense charge-offs. $XX two points in the from quarter. on and specific and in made up loss quarter of annualized million was the booked ago leases centered three-fourth quarter basis an the credit quarter, million. $XX up points of XX basis XX in the commercial which nearly basis loan represented of of net from year up charge-offs prior increase in energy average points total

basin. companies were reserve upstream relationships These operating same the in

the credits held-for-sale, was increase quarter. of in for for to NPAs One the other the moved which accounts

was quarter. sale weeks. credits We in the these close loss two couple expect completely in exposure third The in the next of recognized to the

nonperforming There charge-offs The losses and package We portfolio the and estate the of less additional have have energy loan year-over-year portfolio relatively consistent granularity is stable in linked-quarter a at loans. ratio X.XX%, ALLL, percentage and portfolios. up two points centered basis remained remained total X% for and past points partially basis year-over-year Consumer increased commercial as basis points offset portfolio small a real relatively on decreases the C&I residential NPAs, charge-offs to The other or representing than the by linked-quarter. lease asset year. slides. was by in of home in nine allowance analyst over loans and the The X.XX%. equity three increases mortgage,

commercial asset was seen delinquencies in is the not Overall, a conversion, these cyclical increase in on previously, credit loans. results we XX lows. national The that related credit near quarter most Note level this to Slide shared system include underlying given appendix low metrics recent from the the metrics exam. some the quality leasing expected as problem absolute quarterly of remain noted have And volatility as deterioration.

turn Let back it over Mac. me to

Mac McCullough

expectations Rich. our updated XXXX. Slide XX you, Thank for full illustrates year

continued with finance. growth full approximately year business, in of average including loan X% lending We and home auto consumer expect growth our

more data. measured expect with recent We consistent commercial economic growth loan

for customer we income Full we are be number on to now guidance of checking and deposit you net focused X% acquiring as NIM, relationships. have remain the on A growth providing opposed slide. accounts interest to is provide year which average to approximately asked us on expected core deepening as

year We strategy. expect at conference XXXX. is net the fully accounting provided growth from XXXX income full of impact approximately equivalent a margin year with X% interest for our hedging full taxable the of we includes and the and This consistent purchase cost Barclays guidance

Barclays consensus conference, the mentioned XXXX full for year remain current X.XX%. I with as of comfortable Also, at NIM expectation we Street

to basis. full noninterest GAAP income year of expect We a XX% growth X% on

to demonstrating with increase remained to annual expenses to previously we've we positive year told noninterest are committed X% are actions, our leverage. operating expected Full you As have and delivering X.X%.

million fourth net we expense $XX the taking million $XX unusual to expense includes This mentioned actions are the resulting previously quarter. of approximately in from

past, evaluating target to XX As range we XXXX also points. have or our real will done anticipate cycle in are basis branches We XX estate. year the full we average the and other through below net charge-offs of that remain

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

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

Operator

is Bank proceed. [Operator from Please Instructions] Our Erika first with Najarian question of America.

Erika Najarian

Hi, good morning.

Mac McCullough

Hi Erika.

Erika Najarian

be solid. Thank A, relative will growth that you in about, continues sheet year. well. world it loan if think thinking momentum And wondering as should context how And for on I'm The we balance growth resi outlook about put to we I'm your growth loan growth how to in so strategy from much wondering, for asset you're of margin here? net your a trend next and could how earning reiterating interest B, post-CECL growth

Mac McCullough

until Erika. going and to growth forward. around happy We're thanks, not a answer Yes, about conference this December. guidance year give we're resi questions later your going to how XXXX in But thinking at

XXXX we how a customers the mortgage have for with we the the be plan been have balance going sheet. of that product. that's number have I A deep We our who relationship obviously in and been growth have product relationship that balances of need on thinking forward. about putting cautious mean, will with we're that number resi on we've private a

asset CECL that that but changes more a pricing think change of the be of in going one relationship still product Just from perspective. about relationship the might we're given looking work, forward. the to some But a for like be we that class

Erika Najarian

guess tell combine of how you're I if more us back, just managing let's it be securities net terms step you outlook a trend X% growth consensus take margin greater portfolio. if interest expecting. of growth, sort the flat net-net, something unless than dramatic in seems on your loan X% what we than as is call then I the in would income it with, to the If

Mac McCullough

Clearly, the growth. by driven will growth be in net earning XXXX asset interest income

commercial to quarter. consumer the the from in growth We are seeing categories switch categories the fourth

We in more lending the of the will likely the if portfolios, the continue portfolios you be quality. consumer to like of aggressive dynamics of rate fixed as XXXX we some think as about as well those nature credit of

to so and commercial comments just we're about for continue some could made seeing the what We outlook that change, given to in expect one that's XXXX. super-prime we portfolio, see lending consumer of the now you

Erika Najarian

Mac. congratulations, and you Thank it. Got

Mac McCullough

Erika. Thank Okay. you,

Operator

Our Ken Jefferies. next Please is question from with proceed. Usdin

Mac McCullough

Hi Ken.

Ken Usdin

Hi of and good morning you best luck again, then morning. Hey, good to Mac.

beta coming you touch legacy On through Thanks. have you the expect beta do that you They just just dynamics – fourth. Can to off you total the the of rolling underlying expectations. us roll up impact deposit kind And side, a forward? that in the interest-bearing see cost walk down and on the how much quarter. CDs Thank in start you. mentioned were you'd deposits your can of as the

Mac McCullough

Ken. thanks Yes,

I some repricing specials actually for are with market have money really presents for up of we opportunity that’s mean, opportunities CD coming the and that us. it re-evaluation. a book nice So the the also

we're perspective Slide XXXX. in bigger a the some entering quarter fourth see you the can deposit actually into quarter balance that of I X the of and from repricing what's has into first actually the mix of changes think

we've As of those against I to I good opening reprice would ahead really it's being say, execution seen our expectations. in mentioned deposits. comments, my able

of We late us those like some But retains to into market CDs just that are because in lower. as still reprice that and it of money move the allows deposits seeing we specials we the money market, some activity have space.

that play good to well consumer we that continued one the still down. side, The And noninterest-bearing really activity the out slowing good us there. in continues growth on for trend see don't is

move think these in what deposits some with when all XXXX environment gives declining on timing all, these of see confidence to So, us put of the the reprice stabilize some in rate we as NIM. as I and our quarter is books into the opportunity we deposits and help we the our fourth ability the really to

Ken Usdin

it. Got

Steve Steinour

think over million sale little $XXX so numbers of I the as was well, of year-over-year the impressive. Wisconsin DDA more even

Mac McCullough

point. good Yes,

$XXX million out sold core the as with Wisconsin portion. were So we deposits called the Steve our DDA that those

we needs as Wisconsin consideration branch million a part sale. performance that take into our $XXX to sold of that the So

Ken Usdin

Yes. And just guide on one clarification, you do always GAAP.

of that's $XX that million million fourth the quarter, I'm guidance? the So non-core stuff to the presuming in full-year $XX in

Mac McCullough

the of good Absolutely a what Ken. a That's call-out and margin good guidance…

Ken Usdin

And of we see then? right. next All should year that benefits the

Mac McCullough

correct. That's

Ken Usdin

right, All you. thank

Mac McCullough

Okay. Thanks Ken.

Operator

next is with Jon RBC Arfstrom Markets. from Our proceed. Capital Please question

Jon Arfstrom

Good morning.

Mac McCullough

morning, Good Jon.

Jon Arfstrom

to in mid-January Mac, I wonder doing not going what be you’re guidance? thinking margin about

Mac McCullough

I be lonely. will

Jon Arfstrom

last Your to what’s chance right. do

Mac McCullough

Now imply, Jon? what that does

Jon Arfstrom

income mortgage wide would And a the growth, range higher if just the it's understand thinking wide drive range? help us can have the to I'm pretty Noninterest and lower, you range variance you there but end – of what Yes. full for the drive the you is us that year.

Mac McCullough

the see mortgage absolutely origination favorable volume we spreads correct, that's up good I nicely. and holding continue mean, Yes, are Jon. to

exactly could some think to there. upside but it. be, know And why don't there strong is we how we So going we quarter that's the gave be do

Jon Arfstrom

and Okay. focused refinance, some there something strategy more is the this And I more MSR the strategy Chicago was or is is than it driving maybe origination origination lot quarter a of that but it? understand still is

Mac McCullough

and FirstMerit since out has of out the franchise, been the some do capabilities but broadly in the the lot a mortgage of Well, made built think in it Chicago market, that origination of as we FirstMerit. changes I and is we Chicago Chicago particular coming the across acquired growth

Jon Arfstrom

Thank you. right. all Okay,

Mark Muth

in We both of here Michigan Michigan also lot post-FirstMerit. do strengthen – in a Ohio and

that downplay impact So don't either. to want

Jon Arfstrom

drive it? volume that's the lower higher end it's safe that's you But that going to to end it's – really just to it's or refinancing say

Mark Muth

way look to Yes, at a it. that's exactly

Jon Arfstrom

thank you. Okay,

Mark Muth

thanks Okay, Jon.

Operator

Autonomous Please Our from Brian is with Foran question next proceed. Research.

Brian Foran

Hi, good everyone. morning

Mac McCullough

Good morning, Brian.

Brian Foran

comments I recession the of the that you one just or I'm can see you horizon, guess, several some made Steve, mentioned you it is but a cautious is on like I or seen that side. the kind wondering, persist mean, we win, period something on to you've eventually don't without prolonged commercial also commercial and of of kind can slump a tips eventually stays for i.e., kind longer C&I of tip a a have is has other a if in it in lending if don't or recovers? like we C&I recession, weaker recession that then in recession, cycles.

Steve Steinour

of the levels but In context, different addition would naturally have Right. lot of commercial for banking. slower there bank out other do translate commercial in growth, a for lending it to many there options into are avenues Historically, customers. reduced have financing you today said economic would

year a is I have occurred to the of that first certainly second compounded the that half the combination half the outlook what think we're in and of suggest the trying bit. have factors somewhat more late

a global whether So have the an big sector in. Midwest here we're export tariffs, manufacturing and it's states slowdown, and in we trade sector

Just we're into talking last as mentioned call, ourselves in we almost this. the

contributing our customers qualified number slowdown continue slowdown. we suggest issue still a get a Many think is can it a they I their So factors of are employees. number one as see to and of to

recovery steam constrained this a that continues. a little lost think but it so we labor has is And

Brian Foran

up for But into kind get expenses a make XXXX. not to in the core year, the franchise. or if much So do to also you but to environment, I'm of number based have? just trying in maybe then trying make expense normal ramp remind the on to ramp investments trying side. one a you down how us you're want And the you follow-up on flexibility expense Can

range is XXX react year in the ability points? typical X% a do points, year? basis you How plus basis XXX As or to have minus the progresses, or much

Mac McCullough

is Mac. this Brian, Yes,

place flexibility. of So the expense productivity have improvements where we into still EPS We think operating ends, have some a look and the the that outlook. move before through manage that to how and what's in to the franchise. we rate things go we I going some flexibility case process at that we've do different year in every taking through think in that go know believe just economy and changes through year like as to have we we're environments we put levels important interest We we with of or or want leverage the proven so we investment the back

and that think about opportunities So leverage. We're XXXX, on manage positive that's investing the side of make going really operating into the XXXX. to us for to the spoken in has it's what we terms activities recognize investments that important we're I we're important that as for to of going franchise. we as think expense have through back some in And to important we Steve that in the also continue

overall and going to going that investments important our position done. to we So careful make confident and drive those that already franchise the we're line But continue will we've we've to competitive the of got be flexibility, top health the in what about addition to think we're going forward.

Brian Foran

congratulations. Mac, Thank you both, and

Mac McCullough

Thank you, Yes. Brian.

Steve Steinour

Thanks Brian.

Operator

proceed. & from Siefers next Our O'Neill Please with question Scott Sandler is Partners.

Scott Siefers

Good you? morning, are How guys.

Mark Muth

Scott. morning, Good

Scott Siefers

just of some example. guys you sort question, do securities of between the you for on as How to think the rate? prefer at of some I first marginality of margin on other? guess have pull of NII. sort qualitative manage weigh you I on in in the the portfolio one balance the have of margin – looked the dollars past to the some between alluded preserving that margin, you've a kind the Mac, the to to have the of you Do levers the preserving and balance dollars So over you overall kind Hey, one of guys and that sort

on look impact guess, vis-à-vis that the mix standpoint? then those year, relatively margin And I discernible going have you as guys' to shift any commercial. at more the into next from we Is trajectory along consumer-driven lines,

Mac McCullough

Thanks, Yes. Scott.

marketplace the the of guidance volatility in you that So us that of can based and we've terms this providing in income actions just the over quarter. necessarily interest to make environment will Obviously, feedback upon analysts to interest guidance. this the the and gotten whole of with an on in tell giving from take as net in we some drive income NIM switch NIM, did just net as have that story by well might some impact we the investors,

Yes.

alluded at of point, net have about your things have the pocket how obviously. those the actions of and in terms There portfolio, the over still that think players our levers be an income to NIM we we've interest you run that impact securities to sheet. look driving we on that like years that balance that in many So we have optimization and are would we the a take Scott, can

So we're managing we're a interest information through we we revenue is that managing what income that increasingly But going. understand as where organization company. profile the the is an you need is volatile the from bit to more of move going output forward, period. of gives think we the NIM and best think net you

Scott Siefers

I perfect. here perfectly. to Okay, Thank so questions but that. And repeat it you one the think just for then understand effectively I'm of I going other

sort as conference, the cost so a costs month the at the that the side, right? we're in to versus any in that's today guidance of ago all function On quarter in the what or Barclays to going difference trajectory, of of simply the fourth a that have gave change core one-time opposed you

Mac McCullough

exactly is That Yes. correct.

Scott Siefers

And good terrific. right. Mac, Well, All again. congratulations. thank and luck then Okay, you

Mac McCullough

Scott. Thank you,

Operator

Please with John proceed. Our next Pancari ISI. question Evercore is from

Mark Muth

morning, John. Good

John Pancari

morning. Good

On the as confident or help not know way but for you're any us formal and again well. that positive you're there leverage topic guidance indicate did can you operating for XXXX XXXX, projecting operating it I Is with in expense – you're giving you a of accelerate the see amount little XXXX bit at going the hedging that – the actually headcount you're Thanks. that in that's color to leverage off because could of place? or for, of magnitude and least the reductions

Mark Muth

Yes. Thanks the for John. question,

a back revenue is get So about we we then trying moving understand And to expense what of the expectations the into. can revenue we're what the we growth from think way that we're including around decide we some expense into an environment and perspective once investment do range we accomplish franchise. confidence

won't for you and around any give can't I So, XXXX. guidance well, expense

Steve I targeting also are in my Steve's his We're comments We the comments. operating back positive and franchise looking reinvest to in mentioned comments. leverage mentioned in as as

this is back we've and activity the and of objectives, the to give time, point done making underway those in path positive investments to achieving operating leverage. right both us franchise the up what a into So

ahead If heading likely consideration, we're in we the economy get think where going XXXX, we is else invest it's into outlook taking franchise the where the more everything obviously its revenue we back to and make got differentiating is to investments those scenarios. and be going what think those that we are our and performance and investments. But continue to in going underway in think we've important to we're some

John Pancari

Got it.

that that Okay, other so implied of on I NPAs, impacted that's but mentioned But it accounted one additional in that And saw, had of then non-accruals increase. the know you separately you NPAs. credit energy side, looks helpful. increased also some like non-accruals, the for credits – the an in

have criticized may them there or what of assets higher? little up a bit So about Thanks. were a want to that I color your that's NPA and Is else driving driven also all something there is that increase the bunch. just get

Mac McCullough

at timeframe. as I in at before, we Yes, current does the up. It's back there well. is energy we've The mean been not have that, operated at the quick XXXX, in XXXX level number haven’t some this class level quarter impacts a

added, to the more others outside one, then held-for-sale deal move did then C&I NPAs, we relates it and couple couple of of the energy into in one side. As a on one had of additional the we energy and a NPAs

John Pancari

side, on And of Okay. you. that was stuff Thank sector specific outside C&I the in energy? any the other

Rich Pohle

there. pretty broad couple middle we're was credits a it in based, and of market No,

John Pancari

Okay.

see flag the in other to deterioration starting you're to non-energy developed So portfolio? that no

Rich Pohle

mean, for a the charge-offs of represented quarter. significant energy No, amount I the the

If losses, the you on pretty were offs side, the de were energy to the book exclude the the can't do, charge of rest you which minimis. but commercial

John Pancari

luck. right. All Mac it. and Thanks Rich, Got good

Mac McCullough

Thank you.

Operator

Our with next question is O’Conner Bank. from Deutsche Matt proceed. Please

Matt O’Conner

Hey guys.

Steve Steinour

Good morning Matt.

Matt O’Conner

we sustainability quite how service commercial little a charges, talk about is bit both I talk on of a give more the if and for both of addressed far more on, of you they're a color growth look service could high us, wondering but the of those or as in the you kind us drivers again, continued you the was fees I as from both much activity, could mean, Thanks. charges and are good consumer and growth card growth year-over-year. maybe rates obviously as rates.

Mac McCullough

Matt. Thanks, Yes.

can't we good at seeing organization. consumer When the unusual look to to So are a we you growth. anything new because growth news deposit than other that add just call I it is the growth, continue really here charges, in that's driving take organic execution the households good service and

business some management being the and probably products of revenue our and management added have and new implemented. treasury had as kind business for pipeline of particular, large banking, In degree nice the capabilities small is we've Commercial driven lift we've treasury as to that a close side, that well a referrals. some services by a one new in

very, good bank, continue coming we And nice of that's it's would new And into basically core customers organically. you opportunities, that growth is a developing very to is our in I XXXX. card, the customers processing, terms that trend just credit into new think just a payment of So the going debit growth and tell organic

Capital really, Markets growth, to out, good we to see again another continue is execution. good which item really call

capabilities coming some We the complementary to business bought broker additional really other to out opportunity. to Markets the dealer see of and municipal continue been We've leverage Capital has broker to acquisition that that actually up able add very our out products business. year growth there. of our been that lines We and into last dealer,

in got in some performance good fee we've XXXX. So products

continue I think going in there XXXX. are to good some that's believe to reasons

Matt O’Conner

is rate from the service disclosed commercial? I Have benefit commercial on versus charges. your on the the guys works credit credits declining earnings a your what way the guess the the mix consumer it And you here back deposits? environment earnings between Just does on versus and fees

Mac McCullough

Yes.

is part the slightly question? And of haven't I'm toward the the more second the exact really sorry, two. So side, the but between disclosed your breakout we probably consumer mix

Matt O’Conner

is Is in some credit up on year? driver benefit one picked the you there outlook think lower are earnings fees deposits the from and less on that the as commercial. about Just rates the you've next there as the

Mac McCullough

going going I mean we I addition in driver. Yes, I tightly. to big to forward earnings XXXX. don't think be going is manage big to earnings be that But a that's a that credit credit wouldn't think line pretty

Matt O’Conner

you. Thank right. all Okay,

Mac McCullough

Okay. Thanks, Matt.

Operator

question Please next Zerbe is proceed. Our with from Morgan Stanley. Ken

MarkMuth

Ken. Morning,

Ken Zerbe

Great, you're I like guess thanks. it initial sounds message on just make maybe loan right Steve, commercial we I negative get pretty I or your the make commercial growth. know sure you're want in but to that slow, least right up could it growth the the with in better message? more going XXXX is is slowness loan at growth, that consumer comments, that

Steve Steinour

want around to the I customers. think We for significantly were need X% Well, with year-over-year cautious. hearing more be most X.X% done flag commercial from I We've and we're recently. to imply economy year-over-year. running to that that we slowed The We're our to a little growth, a in X.X% outlook cautiousness. just line you has trying

at we expect well. We next grow able to will commercial to be grow side consumer as the the year and same time,

Ken Zerbe

Got you.

excluding for quarter? unusually your in in And fourth full GAAP of high Okay. XXXX, that just then on in a terms leverage Are expenses operating small guidance you the positive question I basis? one guess is

Steve Steinour

basis. GAAP a on all It's Yes.

Ken Zerbe

all you. great. Thank Okay, right,

Steve Steinour

Ken. Thanks,

Operator

with is Our from Please proceed. JPMorgan. next Alexopoulos Steven question

Steven Alexopoulos

everybody. morning, Good

Steve Steinour

Steve. Hi,

Steven Alexopoulos

the CECL. CECL? loans for down I reserve a bit is much on to under little auto wanted to drill change How expected

Mac McCullough

stats, the disclose future, give not at we're but to I'm in of to point Steve, this time. We'll them level in going not So guidance that here. obviously disclose those going

Steven Alexopoulos

change want XXXX? in material enough Okay. Is auto appetite to to add to your loans it

Mac McCullough

No.

Steven Alexopoulos

No.

And Steve. separately Okay. for then

tone-shift Are for the actually more talking wars, start customers? from to show of the manufacturing terms etcetera. customers, is about your pressure see trade up coming financial in you're macro from to this noise starting In you right these statements

Steve Steinour

an ourselves but we, real, trade tariff we're these the manufacturers, point, at them. something issues of this are again, element Steven talking into some for is total certainly of We're I for think there

Steven Alexopoulos

Okay. your are loans And what manufacturing companies? to of percent

Mac McCullough

Commercial about loans ballpark. XX% of to

Steven Alexopoulos

That's of commercial.

Mac McCullough

Yes.

Steven Alexopoulos

and much. Mac. of thanks luck, Okay, best Thanks very

Mac McCullough

you. Take care. Thank Yes.

Operator

is Our proceed. question Raymond next Please David James. from Long with

Mark Muth

Hi, Dave.

David Long

Street I confirm XXXX. thought you if that morning this comfortable that say said NIM of is you're accurate, accurate? Is Mac, but forecast Good I were heard think I XXX the comfortable you for everyone. you with maybe just

Mac McCullough

is That correct.

David Long

do backdrop mind? of that, when you in or are many type Okay, what have in say just rate expectations have cuts what when you that comment? rate you How your making do

Mac McCullough

great Yes, question, it's Dave. great,

September. So a three we rate assumption have January October, cuts, of and

David Long

Got it, it. got

Okay, great, that's I that all had.

Mac McCullough

Dave. thanks Thanks. Okay,

Operator

Mosby question Our is with proceed. Please Marty Vining Sparks. next from

Marty Mosby

Thanks.

MarkMuth

Good morning, Marty.

Marty Mosby

and I on stacks the capital. looking you're at wanted good I ask hey, how question the morning. wanted to a to ask about equity – common return tangible of different

substantially. to but has TCE flat relatively been your the is last increasing pretty ratio over year TA CETX Your ratio

portfolio. that that But know think the all securities mark-to-market I I the that's to there. was wouldn't of related some that difference on of

that ROTCE off because TA to curious TCE increase the ratio just a was we're little causing So, to bit. fall in

Mac McCullough

Yes, Marty. It's a question. great, great

OCI billion other year-over-year tangible XX% pension, common About that. So related equity. we're portfolio up to about $X securities and of is the like in it things

is the that improvement driver So the primary TCE. in of

Marty Mosby

over one the hedging built into prepays or on in. which models the think little all banks mortgage rights given Either servicing is the these servicing was the in were mortgage things. It's down kicking on report of two assumption are us with We've the of the rights? in give exaggerated, and over-hedged. you coming you bit prepayments had that time I the could then the rates a gains several color were And interest

curious So playing how out. the I'm dynamics just were

particular this had hedging. So on quarter, rights these we gains servicing mortgage

Mac McCullough

been But under environment. some you It's over that as Marty. volatility both making the point suspects threw obviously say and would job that of a appropriately we pretty is volatile hedged you pretty at as Then has of of I has two been are a hedged terms there. volatility in but little Yes, high are I team out that you of pretty, of know, think the it's any to hedged, sure going a done time. great mean you,

think done job. a at we've look lot spend we a with of something good very carefully, obviously I it's But and time

Marty Mosby

thanks you. Well, been luck working great where best it's of with and forward, go you'd

Mac McCullough

Marty. you. it appreciate I Thank

Operator

Vandervliet Our is with UBS. Brock next proceed. from Please question

Mark Muth

Hi, Brock.

Brock Vandervliet

good morning. Great,

that them now that can the net term? and a higher that On move of I what confidence right see kind level know I charge-off lifetime can the guess picture provide and quarter, a you the this credit the I'm of you kind what the quarter opposed to intermediate guide. over net on some credit cycle based this friction guide, hold as saw charge-offs little of you cycle we the have in you over surprised having do

Rich Pohle

Rich. I Like we The isolated of the and we performing energy to the this to is will This charge-offs said, in were well well. balance perform that it is book. the continue really expectations quarter believe portfolio, have

to that into So estimate if tie to, you're trying are or the you trying … CECL

Brock Vandervliet

sounds a of, for felt to sense is credit it make quite around kind so there want sure and just I'm I just much just attuned Huntington of all. a to like tone while to a down more Not that. get on been I trying slowing of like battened CECL, has and That's

Mac McCullough

Yes.

at concern that it's as So really important be the and outlooks. is energy slowing talked problems we discussion. have I about less anything think to the the X% our been we loan don't where the portfolios than centered. really take portfolio We on the a differentiate with Outside of look that, credit see of of

some seeing how in, growth place the I of customers the But it's of our feedback see perspective. around I think that's a question take discussion what some hear the a getting So would what we're versus economy what little credit in the and think caution ground. we different, a it we on and about from of we're see different, bit from and what different we on

Rich Pohle

not And recession, a on don't it. making clear see to we be a Brock, call we're

the think prepared reiterated in twice we I comments. that

this So good have the six is reasonably years a would ago you roll been which, X.X% a back clock year.

coming and a it's we're percent So X.X% GDP of just off growth.

could this we this think be while. we we for be, at could level a running So

Mac McCullough

the mean, Brock, sheet at point assets on the earlier cycle. question of to I going of balance put your this not point to we're And look,

our discipline been we've of underwriting process. about So in the consistent talking

environments think this based even like more from customers. in our on hearing I we're we're cautious what

the at thinking. there out but what we've we're customers reflecting still last higher letting you being pipeline hear they So than put know about of year, from and and just we're we talked note we our a caution this time what were

Brock Vandervliet

color. the appreciate I Okay.

Mac McCullough

Okay, Brock. thanks

Operator

And Winter our Please Wedbush with Securities. from Peter final is proceed. question

Peter Winter

Good morning.

Mac McCullough

Peter. Hey

Peter Winter

completing being share the packing on question I'm a heard But with the just of planning the had share XXXX capital. you I under your I order. are CCAR? at buybacks you curious, And authorization on the bottom

Mac McCullough

going XXXX. Peter, it's from outlook depend balance here on sheet for to and growth

end We of bit getting authorization growth mean those of by you that balance down capital end to we which and all come what XXXX our but a to XXXX. levels committed could to the to levels the pre-CECL repurchase XXXX going sheet a take at levels the the back curtail are it's going share back to it's to

Peter Winter

Got it, with okay. year. I've Thanks and you working the Mac enjoyed over

So, luck. best of

Mac McCullough

Thank Peter. you,

Operator

back now Steve to over like to conference the turn for comments. would I closing

Steve Steinour

particularly year of So, market the as I'm challenging what and witnessed. curve we a significant to the of pleased first about through with we XXXX, in in volatility be yield of expect our three manage solid results remainder movement given through environment. XXXX the quarters prospects the amount for our confident the I the we've remain

in Our priorities value quartile while delivering thoughtfully risk continued customers and building strategic annual by operating top consistently growth our the focusing financial prudent for businesses top long-term positive management. shareholder on organic investing executing leverage. disciplined are with We're performance plan our and

us to are collectively our a are between Huntington on end the performance. reminder XX finally, of shareholders that of there The colleagues at And of sustained top focused Board a shareholders. our our high alignment and always with management, and long-term is driving we to Board, colleagues level like and our shareholder all appropriately

and your you, We thanks for thank So of congratulations. with us joining to Huntington. day. Have all appreciate interest a that, today. many great you in Mac you

Operator

conclude conference. does today's Thank you. This

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

Huntington Bancshares (HBAN) 24 Oct 192019 Q3 Earnings call transcript