HBAN - Earnings call transcript Q1 2020 | Huntington Bancshares Incorporated

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Operator

Greetings, and welcome to the Huntington Bancshares First Quarter Earnings Conference 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.

Mark Muth

Thanks Cheryl. Welcome. of for Director Muth, Mark Investor Huntington. Relations I'm be be of found of website, the the can we'll slides, section Copies on reviewing, Investor www.huntington.com. our Relations be at The for call. the and being call the will is close of replay one about starting hour from recorded available

Chief Officer. today presenters Wasserman, Steinour, and Rich and CEO; Chairman, Our Officer; President Pohle, Steve Zach are Financial Chief Credit

forward-looking today's on including the contain Slide will X, discussion, statements. noted As period, Q&A

are subject Such to at and statements are this which uncertainties, and on differ results changes, available assumptions to may based information actual and risks time cause materially.

obligation such We to assume no update statements.

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

it on over he'll turn where Steve, Slide now start to me X. Let

Steve Steinour

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

we to I'd the or who've sympathies been Before directly family those of to my by members like who've lost friends begin, impacted express you virus.

is global the has our the long economic with how opportunities. world. the The challenges Extreme through caused well. open virus conducted live market as the how it daily way short landscape, we business as Changed an the term, We’ll disruption probably around well unprecedented all overview has both changed to day we've the pandemic of pandemic, lives. of the created the is onset volatility the the the reacted in term as has

our purpose believe I Huntington, culture and our rooted extraordinary are For deeply an asset.

health customers. first safety of people beginning, public crisis. recognized has colleagues responses and the the to looking foremost we’ve our the Our and and our been priority for is pandemic. pandemic out has our wellbeing guided Therefore, purpose planning our always of the From and

not our to appointment. meetings the frontlines in Many of every We’ve ensure we us in all drive store day then through in have our with and person branches moved a by branches our but and only, colleagues their to customers new drive safety did challenged To branches early traditional through. it's are ways. serve customers which our closed on

tremendous other colleagues, and of remotely. our home work of from because over colleagues the because commitment and our more most by working For technology productive. the connected our a the benefited of This diligent performed business keep now work we from teams years. is by than of continuity and and to have flexibility the teams planning our implemented We've possible XX% work colleagues policy everyone

our in colleagues, to only We've to position also help but increased informed, a communication them our customers. keep engaged them not with and also keep

for Finally, and emergency were those colleagues we new directly families actions took mental wellbeing for as our to physical and by enhance colleagues. the added benefits we of our virus. such paid other the off impacted And whose time programs

face customers pandemic. customers variety critical These we payment also support that program continue our and of immediately loan action, we’ll that the we term demonstrated foreclosures in but repossessions. our the our they It because there took believe addressed of fee publicly waivers, now purpose customers' action showing early and in measures of We and future. them would relief deferrals, our are for short them needs to and measures included suspension the was clear swift hardships financial announcing a that

into across moments. in last every over commercial weeks processed protection to help and business April $X.X the believe (X:XX:XX.X) times. record to more Relationships loan the on We it's best pleased closed strengthened from were almost billion. XX. during when these our to are before exhausted almost applications the SBA SBA support was in college of to say E-Tran work than able over And access XX,XXX the the We applications volume tough heavy funding Thousands our of redeployed program. process volume we globalized and three trained colleagues customers bank we've with interest I'm these SBA time, XXX to it mutual with customers applications. that in one paycheck of small of

XXXX healthy to and entered across with economic backdrop national economy up. for prospects the picking footprint, our be a We relatively appear the

However, the that store is now. pandemic we and to for altered will scenarios. potential with economy the foreseeable We've has economic the future multiple tried some thinking assess be time. economy our what believe challenged for informed trajectory in the We’ve for

trough be back V later shaped described into The economy does recovery to the best relatively is trough recover levels and likely recovery year characterized followed U until not pre-COVID scenario year. a long in by case could the as a activity XXXX. quarter well then which shaped second in economy deep later strong the into a with this by More extends the

the recovery the course likely is will the increasingly of economy of that the shape a last Over two protracted outlook It scenario. economic progressively initially than deteriorated. the And expected. months, reopening the U has appears more be

environment and evolving we not expectations believe any can at uncertain full-year highly this rapidly this given So outlook, the time. we meaningful provide do for

our we formal XXXX full-year have guidance. withdrawn Therefore,

generally to on near-term metrics the later of provide few quite key will is next limited outcomes is visibility expectations the wide. Instead, some potential Our range months. the in Zach The presentation.

we these thinking in metrics to and discuss like later, our discuss will on also outlook liquidity how Zach risk economic items the on about Rich capital I'd but thinking credit. how management. forms manage view and generally current our Conservative on we're

past decade, management. we've enterprise stress a changed prior previously fundamentally weakness as now We risk during cycle. the company compared the we've to a clear Huntington's for over discussed it's the believe As

and improvements several of with risk appetite in establishment alignment moderate-to-low they began aggregate strategy XX, our that we've with the in implemented, XXXX of our policy and Slide credit details the of the but all key appetite. presentation the

the and credit limits sheet We also credit over time. repositioned underwriting centralized balance portfolio implemented concentration and materially management,

hurdles. return deep relationship bank relationships meet across our relationships We on not focusing primary on bank loan and a the did the implemented focus exiting that appropriate

that lending lending products underwriting as consumer our our across years tightened We conservative is commercial standards well. loss stress took established super-prime only policies over estate. Reserve's real that actions and of lending subsequent Federal standards consumer out sector, customers we the focus on time In comparison, all tightening on pointed leverage our such this potential to and test. DFAST for as for We

cumulative losses the on our Slide adverse Fed’s among in the in shown scenario XX, group. loan modeled peer best severely As are consistently the

and impact. see assess you respect for of we the As allowance the be losses. conservative current our level this environment to credit the and with tried We've provisioning credit can to in

taking capital. conservative to conservative We're similar view, a approach

source ratios to support opportunities. ratios are capital to intend advantage a Our of as our of positioned growth to to maintain take high needs capital and strength strong. be We customers'

over With it that me Zach. turn let to

Zach Wasserman

the Thanks highlights Slide pandemic. were XXXX first for good quarter. X, everyone. Steve, and morning results impacted provides by Clearly, significantly COVID-XX the the

While strong, quarter charge the offs included recognized our net first during credit underlying momentum was for of losses results times X.X provision quarter. $XXX over earnings million

severely driven to regarding was Slide in the the turn weakened our Rich provision shortly, earnings. into XXXX. increase our quarter let's more of review outlook now drivers by but detail economic pretax the fourth This the of compared will pre-provisioned X to go to

believe the rates challenges performance of environment growth earnings pretax pre-provision in rapid X%. interest and Year-over-year We year-to-date. light the rate the this strong in of is decline was short-term

and specifically as ago XX% the capital spread growth in the in growth robust versus of fee banking XXX% growth million than drove X% markets modest XX% non-interest income pressure more income growth income. year-over-year mortgage offset fees quarter year XX increased in revenue revenues, Total on or

we a costs. assets. million FTE growth On to hedging of net continue or deposit XX in interest as two income earning with as X% our $XX compression overwhelmed reduce points pleased our average the diligent to year-over-year expanded basis the program basis linked and decreased X% NIM of efforts points, be NIM basis our results quarter

to support provide call important attention would the information your two to areas additional our that margin. two in efforts the like to in slides I regarding these appendix

we've risk interest actions rate mix Slide of rate We XX interest as unfavorable interest environment, continuously management the and prudently reduce and factors rate the impacts balance volatility refine summarizes other necessitate. interest taken our environment. and to the rate lower monitor sheet hedging

CDs slides in the total bearing an XX July, Slide to from including basis trajectory costs managed month a decline deposit point and lower costs. actively as money deposit illustrates we of XX market our since on February reduction and interest commercial XXXX, deposit rates by promotional costs March. The provides update repriced downward the

remain We expect opportunities XXXX. this downward that trend in repricing to continue the given deposit

as the positions the in to XXX expenses in-store QX XXXX continued investment were the from XX we discipline of quarter. during impact unchanged against expense current essentially took quarter fourth overhead of closure in environment, expense branches, our well year-ago as balanced Total our reflects the including This reduction we capabilities. the took to and technology react the reduce quickly the of run rate, to actions actions

reducing the multipart a of flexible some steps first for most the the began which in management we by XXXX, benefit provided quarter, lines. expense the During expense plan immediately quarter

later. I will on provide this more details

note like slides Finally, income normal to the I interest, that expense our found appendix. for margin, can non-interest income and fee would be and interest net detailing the in comparisons

$X.X quarter. mark-to-market Slide reflecting total X% compared year earning the and available sale quarter, to on growth assets average portfolio for Average year from our increased X% billion or to Turning the increased X, ago to security's the securities. ago

is We fund to cash longer using growth. are no that flows are and reinvesting securities liquidity loan this

the months mortgage year-ago, by growth or during the and driven the year-over-year, loan the from Average first Consumer was million increased, originations economic quarter uncertainty activity the commercial quarter. the on Average X% of loans reflecting two primarily industrial and past as four portfolio the commercial loans quarters. residential by robust X% portfolio. $XXX leases consumer focused of remained increased restrained

end quarter on saw linked a of significant credit on grow basis, However, drawdown lines. period loans reflecting you activity CNI X%

saw credit $X.X commercial lines. During we March, of billion

million we've to drawn the with activity weeks significantly. has started seen slow of April in XX, first April draw other continue While through the pace $XXX

customers the markets. ongoing liquidity is against backstop how It disruption funds long these in and as will retain uncertain a extra credit

year-over-year current with We real reflecting commercial estate X% decrease. loans average manage our continue CRE to a portfolio around levels actively

negatively now Turning core Wisconsin average million the or rate included X% sale $XXX XXXX Note network, deposits. Slide by the year-over-year. to growth this of deposits X% was impacted of branch approximately which June, X, increased almost that retail core

While reflecting various lines in maintained of balance commercial basis the aforementioned draws linked sheet the deposit quarter X% deposits total commercial increased end on were products. that period subsequently of

commercial excess line Importantly, deposit to amount allowing has over inflows the to draws, us amount weeks lending customer maintain needs. the of the meet liquidity essentially commercial future several matched past of

and into money continue focus promotional customer a shifting and pricing. a from in migration of see balances reflecting, accounts the preferences shift in We savings to deposit market CDs our

decreased Average money X% X% core market decreased while XX%. year-over-year, and increased to savings deposits CDs

year-over-year. deposits We through interest this continue increased X% DDA Average XXXX. dynamic expect bearing to

bearing DDA X%. non-interest increased While

acquisition customer I showed growth deposits new our highlights year-over-year. consumer non-interest and we are continued deepening. that on Slide pleased relationship This very appendix, X% XX in focus our bearing the increased on

the illustrates quarter tangible continued ratio a ratios, CETX or our X, Slide year-over-year. equity ended TCE tier at the points the common capital down at one XX ratio or basis X.XX%, equity ended from ago. year the The strength of basis five quarter down X.XX% points common

average remainder second X.X per quarter. for We an the of of the declared or per from quarter mid-March, When During the common quarter $XX balance not cost through the COVID-XX repurchase we $X.XX the the total do unchanged any first This shares intend morning, we currently at started share, of buyback million XXXX. of impact dividend prior million. we of quarter. to announced for $XX.XX first to cash the common our the pandemic the shares repurchased Board a U.S., first paused share

expect We sustain at dividend level. this the to

During managing is liquidity and paramount. market of macro periods volatility, stress

deposits of customers. Our XX%. depth our from at with foundation deposit stable A ratio the and relationship and our its strength of liquidity of our to loans draws position base

have additional Reserve Home we the including portfolio addition, borrowing capacity window. of securities liquid Bank of In discount and considerable sources at our Loan and liquidity, Federal Federal

strength. highlights X capital relative Slide our

our few are past maintained the position regional and the risk-based Over capital. now in of have top capital years, on third total banking peers we

is yield in the high the group. Our dividend peer also end of

Rich? over me CECL. credit, to to cover turn Rich including Let it now

Rich Pohle

Zach. Thanks,

the comments Steve and Before the performance on wanted some elaborate decisions on I at on credit to have implemented. beginning XX of first Slide touched details provide risk of the the enhancements we the call. management I we of quarter, these details have made

revenues. leverage portfolios for and in underwriting policy standards drafted underwriting of dealer a senior are was our a Also leverage leverage among borrowers and marine our floorplan XXXX, finance the times our infrastructure auto and used RV the XXXX, defense. conservative – than floorplan dealer We multiple leverage call that auto in we began have we business, $XXX lending expanded X.X the to our portfolio heightened with we leveraging indirect FirstMerit of of the we through acquisition. that qualify our as standards best-performing XXXX, less for Since lending. loan in million In

eventual We've new construction our adjusted economic prepared the care curtailing long-term by segment. the originations for healthcare we downturn, portfolio in

from portfolio Our in is was construction healthcare now XXXX. where down XX% it

couple risk appetite. refine Over we our have underwriting, moderate-to-low our continued past credit aggregate years, consistent the of to with

have policy FICO held Herman We exceptions. and Green across increased credit HELOC books score standards businesses our to our cuts to commercial with respect higher and

So that has environment a last with portfolio been years. we fine-tuned enter the credit the current over continually several

Slide the relative scenarios peers Federal our cumulative exercise. model for and XX the illustrates of DFAST of losses the loan rankings adverse Reserve's and severely Huntington

between we credit it the implemented. that Steve comparison has provides true As time, know diversification much. the split businesses. risk stress, like numbers reflect our independent steps aforementioned this the of of management Still consumer over commercial quality and We risk portfolios. periods the of our evenly across is us of us portfolio validation that in and It is mentioned as the and strengthened have nice of, only loan have gives sector DFAST our we credit

the CECL increased of one quarter’s on of allowance of our was the increase build the to first for results credit million two credit from X, XXXX, loans, X.XX% the first first day provisioning The at total to day a of in during XX XXXX Slide ACL now million comprised adjustment $XXX $XXX up a quarter. ACL, and or January reserve year-end. X.XX% provides and following and quarter adoption walk metrics. losses the provision. The Turning

portfolio, life recall, As day weighted-average was XX% one has the the much a of longer CECL. lifetime loss a consumer our weighting function increase which therefore, in a you and larger under

build our consisted portfolio. oil to oil almost a increase QX our our For a ACL reserves, net specific a in The XX% ongoing increase includes million economic portfolio. uncertainty and due of primarily million against gas the and against reserve $XX $XXX exclusively quarter, now gas our and the reserve

For multiple and by near and to in to rising scenario including adjustment data different quarters. the recovery subsequent levels size points QX, that of in made we unemployment XX% falling baseline we the Moody's use levels in showed QX X% GDP

and both of stimulus, to the weigh factors well potential the to will level our also the We support as provision. unprecedented government it provide. businesses These consumers economy drove as QX

a reaching by models in economic now deterioration QX, more provides show unemployment and of March falling in base showed. and net that The GDP the further recent improvement April QX recovery with XX.X% XX% case than an less

as to quarter. our continue for second will size We we evaluate data points like these provision the expense

and the Slide overall XX had has on our NPAs TDRs of oil shows our and NPAs. impact our portfolio gas level that demonstrates and

over range commodity with one-third in Oil under have proactive to recognizing gas our quarters just challenges with NPAs to levels portfolio our to reduced NPAs significant earnings and for portfolio, We a the also are $XX respect commercial of in prices continue standpoint and this represent and dollar we first that half current QX oil They several quarter of we payments. industry. by our XX% and see million. NPAs contributor have this of NPA a Outside been interest anticipate gas as NPAs discussed these NPAs. commercial below remain of were impact for overall economical from the our principal the increase. and Notably,

been have to to areas have we that demonstrates XX fairly exposure that hardest of the some date. COVID-XX by a modest Slide hit

nearly comfortable We with team's completed all deep of the these current are have assessment our since recently dive portfolios situation. and

sandwich operations declines offset exposure chain customers been drive national service brands have in-house up quick takeout have for pizza restaurant Our service and that our people. the primarily to and opened is maintained

portfolio. XX lending details our Slide leveraged

with smaller leverage of heightened for in million account borrowers to for Our under $XXX uses definition X.X leveraging revenues companies. senior conservative risks times

X% a to and point more Our borrowers. other loan as manufacturers of lowest to capital, percentage book leveraged of focus is total represents provide asset-light are We years. borrowers on tend to collateral. service under several opposed our loans our that its They and weighted as in at

is of play lending market parry to avoided because than segment leverage term deliberately process an that subsegments in commitment revolver and reviews risk a manufacturing that covenant-light potential book, structures in XX%. pursue are a this the represents responsible our requires typically designated account credit leverage contingent providing follows of revolving We That a well. for generally there consistent We've but with hold down credit review. executive understructured closing loan-B regular as portfolio undrawn underwriting its Within cycle. at corporate lending more for no

ago quality in XX from and in leases one commodity quarter, from approximately key metrics three-fourth basis together to increase quarter. gas of snapshot gas and oil was large average points a made Net total year basis of commercial and limited in provides coal-related and The low quarter. and current be loans the The charge-offs and prices basis net XX centered points quarter the XX the markets points portfolio capital up credit which the charge-offs. the represented for activity. annualized continues credit, up by up an impacted of the Slide commercial prior on XX oil portfolio

I As earlier, have significant allocated this reserves portfolio. we against mentioned

net in charge-offs, balance XX demonstrating and portfolio and the losses well points, oil of that excluding Annualized coal-related gas basis QX. our performed were

under million, carries guarantee. is remaining which investment-grade coal Our of an XX% exposure $XXX

ratio strong XX XX charge-offs were X oil quarter basis to year-over-year to and basis year demonstrating and as continued our I points XX linked consumer QX basis a ago, the increased points basis points in earlier. points XX down points described gas Non-performing basis due asset impact to portfolio. to Consumer compared

have in granularity analyst the package in portfolio we always, by additional the slides. As provided

back turn to me Let Zach. over it

Zach Wasserman

Rich. you, Thank

it refrained we have manage As That time to from guidance. insight a you full withdrawn earlier, much as company. have quarterly we into we want trends we the providing mentioned can. key provide XXXX shorter business than as as we said, guidance much Steve year implies Historically, horizon our

Slide will second we focus expectations, provides So on we where on realistic frame can the XX therefore, quarter. comments

$X.X line currently and will made of and next to to additional we PPP majority for PPP commercial uncertain, quickly. of X% The saw remain we the early line months. the large in drive draws to sheet X% duration of the loans of them of into loans, any excluding PPP several of the in with the higher near loans SBA is any a commercial Starting $X billion impact be We over the but term, phase. off April, forgiven outstanding the SBA average loans commercial March and the loans expect majority next expect to come draws billion

We expect modestly lower. portfolio flat and as portfolio, to is vehicle consumer loans auto to RV/marine be reduce a expected The lesser to declines. extent, sales activity to the

the expect second continue, in on activity We growth. as modestly residential home flat of level and as the pre-existing quarter, expect governor in trend higher to to runoff to portfolio we the of a be equity refinancing robust a acts mortgage

X% our We the expect on PPP, to excluding deposits of core the through second impact to loans, linked commercial balance recent commercial influx of the expectations average we to again to quarter. deposits, Similar remain for sheet the increase quarter. X% expect

core and consumer behaviors. in by to attrition deposits acquisition flat reductions average deposit be consumer traffic expect We slowing higher similar to branch offset altered slightly is given customer as

the the second quarter. proceeds to of flow program. deposit PPP fully bulk other the the the do in of of intent we We loan will not weeks, the hand, growth over expect with next consistent of program the eight steadily fund growth out the On bank expect the

positive is and a of outlook, outcomes. We've to than provisioning various modeled provide us driver statement, of some goal operating not. range variability for the have wider of and of revenue in annual the do the for possible outlook, income achieve revenue which but our normal leverage expenses earnings key and also the a expense QX opportunity non-interest scenarios realistic some to of which Moving

important We dictate our of strive the a constantly continue an not between to results. positive decisions. value right operating that but short- view metric this to our to will part we short-term long-term believe creation and We long-term balance is leverage the find of one model, allow

as quarter the offset related organic income. to sheet the to by Within X% moderate X% larger expect on more linked than we confines, average these pressure NIM the declines COVID-XX total balance fee revenue decline in is and

reduce. but Customer income processing combined, spreads for activity based charges, service expected approximately are fee expected and payment remain historically pressured. expected all fee be deposit are income All lines, to our robust, be to XX% expectations is Mortgage to including to banking current marketing wide card down sequentially. secondary items, gradually

second We quarter. have a less into visibility the and expense little control the more outlook for

expect ramp a reduction We compensation-related the on by X% between driven be the and related sequential expenses in would a of by actions. year-over-year X%. increase long-term offset to merit expense basis, incentives to by increases, CECL annual primarily expense non-interest and On basis, annual increase X% expenses lower our partially

a XXXX, plans. plan. prior management like we became and We the facing contingency XXXX challenges implementing rigorous when constructed having begun years, entered have expense clear, these expense began plans management We

Our four expenses, and prioritization on how of corporate the across network terms implemented. travel organizational company. and they which of vary as including of structural the expansions; composition is marketing, and the categories The categories as expenses investments, compensation focused infrastructure; will the investments be actions sponsorships; levels quickly can pacing across such approach in and and our and business include the these facilities and take planned of we branch size expenses, and size technology such of organization expenses; discretionary digital finally,

levers we expense are within spending. can quickest discretionary The pull

been social travel spending as result lockdown measures. entertainment dramatically reduced Our distancing and a has in of the

and prudently investment acquisition plans In consulting pre-existing the activities, expenses. We're reducing business delayed and outside expansion depressing services customer expenses. We are near-term some marketing scrutinizing non-essential curtailing macro have initiatives. given all also are category, environment also the we

digital However, technology we are maintaining mobile investments. our and

organizational structural regarding future decisions expense opportunities expenses provide immediate to and our less While trajectory. reduce will the impact,

We regarding our are or timing action. taking expense know at that actions, we providing scale details of this be time will decisive ultimate but not the

the net charge-offs XX as economic average range XX in target basis the of the as most reflective the points. in to through of outlook We to the high be uncertain gas our cycle near currently considerations. This the well of in quarter item is is oil Finally, end earnings and the portfolio ongoing credit pressure expect second provisioning. broader

sound. Fundamentally, our remains credit

the economic reserve additional quarter several continued has deteriorate This uncertain. elevated highly will the outlook since too too much to early expect is quarters. estimate – the much risk ultimate building should However, end It to next the most the to build, in you conservative likely additional approach in remain provisioning and result and of is in quarter us reserve and size credit second to remains management. but our for

I can will to so now your over questions. turn it Mark we Mark? get to

Mark Muth

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

Operator

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

Erika Najarian

Thank morning. Good you. Hi.

Steve Steinour

Erika. Hi,

Erika Najarian

category, Hi. My please. you wondering by question could was loan for your first allocated how a I'm if – is allowance of Rich. sense give us on

Rich Pohle

commercial got $XXX – category, By consumer total got mean, That's to I the breakdown allowance. get was million we've we've X.XX% and that loan was for Yes. that. million the $XXX about the to

Erika Najarian

it. Got

Rich Pohle

of the to think, the economic models Erika, you this then government quarter. shown and for the And really the hasn't the allowance stimulus quarter the that with but have weren't trained severe is in we forthcoming this, decline that first so really I have the end scenario we had is – in yet challenge at up right? the

came the did the throughout that the ratio of quarter quarter lot the want the we We end March. this models the So out economic factors coverage number at a went into provision or various judgment of we believe a them. We that there's month at that where got look we've of provisions. set when setting of

Erika Najarian

question is, from follow-up DFAST even charge-offs still future think XXXX, And it are actually might your question bit Huntington, incurred I'm estate, at can When of real can about real commercial there's what as charge-offs. tests detail wondering, in we're recession leading test seems distort of referring be how significant I a about biases to we type And company-run how like sort the by this to from losses. for of out stress fed-run model I I relative pretty little guess, estate. what that commercial reserves the Got appreciate model, in and tests the I'm the it. my and terms on in thinking play look contribution a

terms what In is part obviously, of other not unemployment historical – enough? losses words, the backward-looking of what severe to of And stress is CRE? play, part the stress test in in is very seems be one tests,

Rich Pohle

So relates hit – I think to DFAST looking. the you head, on backwards as the it are numbers nail the

into So the real last the the I close estate one side remarkable. going company fundamentally say back. going were the area since we on customers I today downturn so probably than last commercial that been downturn. the has this where change over And transpired fundamental commercial different has we would is mean estate that real are we had to X,XXX

XXX today. about have We

sponsors, sponsors, clear Tier-X there's So institutional a focus on Tier-X sponsors.

the we're not sure be we're projects there. focused financed so in somewhere that knowing on the we're make really projects overextended only might financing but that developer the to And not else that

of capital from a real various on over XXX% estate under last we're the today also strict capital capital XXX% We're of going downturn. standpoint, within and of We space. very into supplements – limits the percentage commercial with

So I think the that's one. biggest

As it side. losses consumer going unemployment of of other on things, big the relates be a is clearly, the to some driver to

peer I consistent DFAST been our of the have our have time, consumer results at DFAST over and there think the top scenarios charge-offs the in group. been very

consumer a stand about feel where results I lot we very to good the the of So categories DFAST from relative in XXXX.

Steve Steinour

policies, and double subsequently Erika, that digit when them. we that changes levels lending base have I in we might add. This the to Michigan consumer Ohio is joblessness Steve. were made or unemployment the used models The the have in and

XX-and-a-fraction I in XX.X% Ohio percent in So think Michigan. and

use prop and has you've FICOs We us super that XX years, our score, drove a origination. level So attack but quarterly for equivalent book. the seen of to will prime we the

somewhat an in we've for believe substantially cycle, through a of appetite. losses. talking moderate-to-low higher be, having unemployment will as outside believe, risk last of and around to outsized of performance about do loss, And oil sound started we've year, been that got portfolio address we and that and us consumer the gas we this expect notwithstanding shared aggregate we early that that loan several terms So to also we've for supported very year. And clearly exposure our quarters expectations higher this

gas So credits these all and SNCCs. – all are these oil are

I losses ahead what in be can coming ahead think Our slightly – the certainly that industry others non-accrual tell And in frankly to of the than or than we're – we taking earlier decisions. including required, regard. from are earlier we're going

Erika Najarian

Steve. you, Thank

Operator

Our next question proceed. Piper is Siefers Sandler. Scott with Please from

Scott Siefers

the Good question. number morning, customers, hoping there taking both Definitely consumer guys. but are overall for in dollars I modifications little was portfolios? deferrals. of Great. total some detail the maybe of get more maybe on a modifications if the and and for the Thanks commercial

Rich Pohle

you, Rich. that I'm side, for deferrals on we've happy consumer processed. billion $X the It's Scott. it's that of Yes, about to answer

We it's servicing for the billion. book, about also deferrals agent have on. for made $X some some that mortgages But of we're our

bit we more Clearly, historically, little is just And is we're need current most curtailments counting of about deferral. to they in it's number. I a side, but billion, the doing the floorplan auto cars that space curtailment half $X would in our environment. the on auto floorplan say commercial the we're On of than been lots be in the payment and given what the that dealerships, than longer have

area into retail in commercial deferrals and on real space, active with and been we've is of digging we've estate deferrals. And then the other some space, provided the commercial side. So if areas franchise other the the the hospitality on – you where also restaurant one

Scott Siefers

you of sense deferrals, of sense perfect. how have latter is the in advantage Thank say, you made. how or those kind of just then a for exclude Okay. on of of much those of remaining deferrals, if the of sort because in much customers kind you insurance floorplan do are would points needed that logically, Maybe plenty commercial environment? makes but And sort this taking necessary we That's you. versus

Rich Pohle

was I where are night. the the I at deferrals in part. they estate only hotel that needed rates, for The felt I are, commercial the real would like occupancy one say last the hotel given I was most

anecdotally, think need. I that's a So

commercial I think is real real. estate the in crunch cash

not needed of our have being you is us. on looking customers We for that bar there high out they Part generally when proving did a it. need

a determined give if for just that we're I it to to most. haven't point needed come And would real generally it commercial going thought but the back it and was area needed scientifically asking that is probably didn't. who I so estate our you, and you're really deferral, who

Scott Siefers

Yes.

Steve Steinour

$X the the $X was billion mean of of $X I billion billion, And floorplan Scott. –

aren't open, many and – the So there. understandable frankly so just showrooms of

Scott Siefers

Yes.

Steve Steinour

or We that stay take they've car the a actually the good the different We keep to or sign take to – with just for they consumer on slightly share side, the we intend it as a other view you. residents things. deferrals, asked fact that in

increase With unemployment, perspective to in was with the rapid it XXXX, customers. tended hard houses actually these positive when communicate our let are from to go. They indications XXXX versus

likelihood more crisis than this cycle. health would've will the to protect prior we of I in much seen think that be the nature house

Scott Siefers

Yes.

Okay.

Rich Pohle

The I consumer of at and a just our were to customers you of XX% higher time other the is of the number deferral, current. our even point thing commercial

as out wasn't help. good it was kind that for of are These our So needed the customers assistance. customers reaching the delinquent though this

Scott Siefers

Yes.

you, I guys, very Okay. appreciate much. Thank it.

Operator

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

John Pancari

morning. Good

Steve Steinour

John. morning, Good

John Pancari

if would can regarding you I was time, what changes looking maybe, what prior terms at therefore, the you we stress – test know your in color it's about losses. I and I gave of wondering appreciate want try tough, your to a a current fair better just the help the to you're impact over outlook? your the and how get mix business idea now think through-cycle through-cycle could loss just and your the of us in assessment given what but we're given mix be, of at. economic level looking that

the of on Where do Slide fair April did percentage then reserve do you incremental indicated could think to Thanks. or that pointing – here? is separately, And XX% the to appropriate go XX, relative I DFAST XXXX an point to but to you reserve of is the DFAST, think What here? worsening. you really additions point likely adverse data you know the being also to

Rich Pohle

the what think your And I be to is both I'm through-the-cycle the feel challenged out John, as answer this to losses, going questions. how that We as long about it that think now relates uncertainty we coming just right Hey, of new I to the with dealing is to are good and this. it. going behaviors we're the into last challenge of all book face going

side, we consumer – the On there. credit good quality very

elevated likely the out that pointed have we're gas. have in going and commercial to on charge-offs oil side We

for the it's a to with forecast that, hard come through here. cycle Beyond really up charge-offs

Steve Steinour

up this So as John, of following week, this spooling we'll a middle if Right But that, sense what better to again, hoping think like. status like going is get looks going a dynamic, the this view might would to changes. look a of we're now, X. implement And start on to and recovery these quarter. May. next return-to-work Michigan, May best it's this case have better of Ohio be be to industries view quarter I get

to or more likely growth they're of could the and will this going be to third what repay and going time the how to rates before us. I really very it's sustainability be off of fourth ultimately, think quarter what businesses, challenging these moment understand come be we

Rich Pohle

Yes.

to quarter, look end to snap the provision we'll really probably the So as going that mentioned, at at the the the customers decide might reaching businesses I in stimulus. scenarios, all to impact you new it we'll data Like lot the of of see relates We'll second to at clearly be quarter at be that second a quarter. a the now. kind look line we're for what of take just and end the There'll the right have that lot just what the of the estimate going to expense tough now. is quarter. be that a It's would more of

John Pancari

prepared Thanks around around Thanks. us that? post dividend. And just give Can thought And color. indicated, remarks helpful. your see in sustainability. Zach, in coming the that thought process just updated the your you you process the for sustain That's then that the incorporate you expect data you to quarter? now your Okay. the And that does

Zach Wasserman

maintain at monitor we We to the got it the continue think we've to think it's that, the capital now. and but levels appropriate support current dividend sustainable right for is level and to intention and level. model, the Our that we'll

John Pancari

Okay. Thank you.

Zach Wasserman

John. Thanks, Welcome.

Operator

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

Steven Alexopoulos

Good morning, everyone.

Steve Steinour

Steve. Hey,

Steven Alexopoulos

on John's So DFAST. just and to start, follow-up question Erika's around to

of we Like The own losses, when down. think supposed global look really at you with XX% of I to only look to basically shut you're that a economy at your are we're I coming? coming that's lifetime And reserve a think I it's And lot struggling seems get the it do large understand, the framework trying we're with is think and in going at on CECL, we look losses. framework is what's up size to of reserve build what at us isn't low. that if DFAST and tests? trying how stress of reserve again the the internal versus reconcile a economy

Rich Pohle

Rich. it’s Steve

exercises. I DFAST think think and different two really are CECL

of mean. period differences into also other DFAST is period. period continuing in but to fundamental time, link supportable eventually scenario, hand time the make and extended You a sorts there that is together, that that go There them over you're returns reasonable, is for dynamics that an to scenario you're each. to can of CECL it at during assumes The try the that of are deep severely for are continues all something the loans adverse looking on that that. the assumptions a

And have two And a we'll the assuming you don't or scenario so reversion then and three in a also it's make to year loan. another you're a there's that. mean on that life running

you point. to it, data So I wise. is while from can I think necessarily too conclusion a the draw good CECL comparison much think DFAST also don't

Steven Alexopoulos

And for you're so if Are at that’s decline not see calling Okay, COVID-impacted follow-up, expecting to I'm RV. auto revenues particularly Slide out for think some a sectors, right exposures, fair. sectors, or the your look floorplan I of we in material surprised auto. XX, you just about not these

Zach Wasserman

some a we've going protracted Yes. feel category as We a to hotels auto. there and about where don't of under going areas to be think other be is to just longer necessarily We I it the auto. impact same fall short-term it's the that impact. mean talked could

I probably the ultimately, going that But are to of a extent, auto we level. that RV impact and people some got lesser with get don't and, buy the other cars, a reduced do here. at think, to out we've see ones in to we

Steve Steinour

that multi-generation dealers In created have delinquency. wealth The we most service XXXX, have is have dealerships to to looks flags. of need that underwriting that our a supportive charge, extent multiple over dealers also ratio parts are and family time XXXX we very they didn't regard. typically and that believe very really these to be are enormous at Steven, that the the Part strong, will These XXXX, consistent. cycle, are to. strong floorplan, of and strategy coverage in fix The

Rich Pohle

standpoint, we shape. good on a on did the a is do we here. deep very not dive portfolio, – even And from though piggyback a Just in liquidity that auto listed it's feel obviously, the book

Steve Steinour

and in charge-off that book. lot we've certainly don't of in decades the originated, what know, conviction a within, of in have a didn't auto we going forward We two have quality

Steven Alexopoulos

questions. Fair thanks for enough, taking my

Operator

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

Ken Zerbe

you Can their real just question, like reserve I different higher would materially other some in – correctly, the I reserve this you such There's characteristics just heard on and thanks. portfolio? X% a energy energy your the energy quick other it you the portfolio, heard, just a against a of about might from of guess terms that I need has was loans of we Hey, Thanks. this over heard talk how portfolio. a banks be have portfolio. yesterday, banks it reserve in if XX% that

Zach Wasserman

Ken, all SNCCs. know, as we all are well, these

there's good the we're company So in credits that in.

any that that is So portfolio necessarily I others. worse don't much so than it's our know off

are losses. been recognizing mentioned, in has book, have we that in in quarters significant. think going the the last assume reasonable that And it's as this we've to risks to and five this very we're proactive pretty Steve see losses over book taken I that have we further

than think dealing rather these you headlines is credits situations to to around go a in take big of I heading terms troubled SPEs industry with ownership it through of here. liquidation when So the form process, tells banks see the the starting where you

still our see I term strong. at not that looked so particularly they where into fundamentals, think And long much prices, we but for are the gas around sized are taking term. we on longer where account we and we've natural book, long-term reserve So not feel the this, today

space And now just transpired than in is right lack there the that markets this in last completely activity is downturn. of a fact different the capital what

levels higher go reserve reserves through we put to appropriate borrowing going to review and size redeterminations of forward. of here, base kind spring that the and it's think we as So we'll continue it

Steve Steinour

And Penn this tough like got clobbered the with where years. beginning five the a and is or Square mid-'XXs in more XXXX, industry for in early we much think shape stayed four

some issues trying outcomes be are with we've the on realistic result just short of that's we think And are so in for And to that oil these as but benefited what workouts. longer-term this a be portfolio. side. certainly, likely price we're Russian the going There's as view OPEC to and the gas seen to term, deterioration subsequent spillover

the go, we is think as way to the mid-XXs. lot of combined. the see You're We these SPE a companies in going did to do

to this time. leads about expect future. consequence see bit what happen relative to frame, that to have over but some with to and, in the direct as that And and me it a time conservative perhaps I we'll clear-eyed think, experience us others, I a in be

Ken Zerbe

it. Got

as build question. Okay, provisions quarters. if I expected maintaining front more – provision we that not get when think like But for I about that And a lot is clearly there's weakening much lot a my by load uncertainty should we should fourth you reserve the expense that would more several fourth front-end lower the talk which versus then point? your load elevated if just – provision Can seems are if I CECL follow-up It lot the mistaken. you that just out talk that’s of quarter, but and at really provision I even you question. is conceptual there. to, dynamic, quarter, you – helpful. a say, of just I'm you expense, If for heard right, of a next be not still a Can really get it's think reserve guess you can high said economy how even

Zach Wasserman

recognizing is variables the on book change, what adjustments. The the that today world, the further have make So didn't a economic were around losses to the are whole wouldn't perfect in But we're you CECL into they had perfect clearly, assumptions that materially and today, economic that any you if you the where concept quarters, right? several going foresight the you we have reserves or the market are of dynamic a very to the of release change under going next to a life drive and road, over the in additions, what's have hopefully, to down for loan use CECL the that's methodology.

Steve Steinour

stabilization the great fiscal you well. the Huntington good frames it's We'll that, in as of part such these will and well industry on the But mentioned we'll a sake stimulus. And industry, and – for be we're as the floor to country, the it's And very based that resiliency a of banking shape. get to start the downdraft different Ken, think, happen see states, in reopen could in we moment. and the in I recovery. time

will And sharing we've recovery. quarters, day clarify that more the us collectively. think where hope I but some those in on a lead to future. I be position So give I think moment here, got the so, there'll are uncertain, will us you a the been having couple to projections will a a conservative I a it of in or horizon will think and bit where intentionally a things better And reserve basis quarter foreseeable see where have the picture confidence with clarity

Ken Zerbe

Alright, great thank you.

Operator

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

Ken Usdin

front. lot question capital thanks the One a Hey, on guys.

process ratios? to CETX, does stay into that? if X.X% So And you're you also, thought right capital enjoy. zone how come want at that Do your in the try you maintaining middle all, X% of around that TCE, to around XX% to

Zach Wasserman

is will one. I Yes, this this Zach, take

ended So X.X%. just our for QX CETX about at

towards XX% over And point. at intention time. expect high in Our plan continued in that's the end to the this was be and goal would of capital the I the growth range X%to year-end,

the being I imagine, for expectation we that. the repurchases you and to the for could the that major foreseeable continue out be of sort of time model, year-end. fact scenarios will paused we on future think here. we And year where numerable continually share play the towards mentioned rising might the as is around the a driver But

the high potential range. So end of it

TCE. X.X%. TCE You about talked at just So it ended on CETX, about

in goal that higher think that to was X.XX%. than our level. I And somewhat be likewise, the

comparable year expect as across at We of that think much both of to as to I a be CETX banks. just them ratio higher is We trend critical honest. It's other. metrics, internally throughout both also very about the each And measure. look the as regulatory well. So

it's think, and to though, us for so as I And governor, relative the position. key TCE a understand for well. you is helpful,

that And particularly loomed precious, in measure the last capital downturn was large. when

conscious we're so that factor both decisions. And our both matter, and we into

year. I I look to expect think similar they're modestly of trajectory at both them, would that toward said, And be pretty both shapes. of half the this rising the in as I back

Ken Usdin

Okay, it. just got RV/Marine follow-up side. the And on auto and a

that like growth generally we loan the outlook, in outlook you the consumer expect noticed have in terms your $X.X what And billion albeit, helping the of auto, understand you of first mentioned of terms the in side. you seen and probably in it way growth quarter in on the a originations Just given volume auto time. long just the uncertainly, a to traject we've in RV/Marine? Do lowest us

Zach Wasserman

you really I of about back And shuttered of activity term auto, will year. just start mean like regrowth QX modest to recovery therefore, why of we dynamics kind talking do great lower. will largely what tried sequentially realistically been degree to what a and pace it we've the look given the in the don't like. on being we half we and see see before about continued in in view what sales expect to the longer depend dealerships the That's a on the downdrafts auto year. to being really have It looks it give we quarter-to-quarter

think was portfolio too. where that very lifestyle the book, on because was expecting regions downdraft smaller very it's I we're perspective, focused that From RV/Marine relatively super always prime, a purchase less very, people, for key a and a

to expect probably I but there, So think down-ish watching flattish that carefully. also we're pretty more

continued side, residential expect, but robust demand, demand portfolio the ask, that and mortgages given their growth off us. as offsetting might you runoff think didn't we we there, flat I redo on pretty mortgage as expect essentially you just

Ken Usdin

Appreciate Got it. it thank Zach, you.

Operator

to our I have We for session. of the question-and-answer like turn the would back end over closing reached conference Steve to remarks.

Steve Steinour

challenges. you pandemic. the all. a Thank most about yet. resulting economic Perhaps We've we We don't today what talked know the reviewed importantly, lot

resulting be core. from we So brings the are I a and Huntington ahead. a days at elevated move as nation, a We periods Americans through resilient take adapt, this in a And been my and a organizations as more decades, change result. we step as while perspective. for believe, different and We're ask one in build back, and industry uncertainty to the we better will prior will forward. know and is well I'll in this is I've This four to country. you I'd as seen it and in you innovation history thing offer Having like to pandemic the of I learn much this going nimble positioned time any The some to believe concern have career, very get than growth, is past, have before. stronger,

businesses the work of our seen for to SBA in commitment program. I'm a in looked arrangements, to our commitment their our reoriented communities has the better colleagues can and, of they've our and unwavering what our of stronger working course, way proud needs been result as purpose We for helped quickly they inspiring, our the customers. hard and and stand for Their will the new and emerge customer responded colleagues of out to local Their through the PPP concern be clearly customers. ways

the sure face also the challenges this outperform along our collectively This times took are – the As compensation our why why cycle. for to we Board, to on I XX our XXXX is the with in among today past, among make with exactly amongst plans are enumerated position reminded shareholders. changed largest in to through long-term Huntington aligned others, like are shareholders is colleagues, you largest. Huntington, XX, we actions Slide of this we we Preparing frequently

in I a this about confident thank great prospects interest Thank your remain manage environment. With very Have to challenging for through that, our want you long-term I you. we as day. Huntington. much

Operator

today's concludes This conference.

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

Huntington Bancshares (HBAN) 23 Apr 202020 Q1 Earnings call transcript