Huntington Bancshares Inc Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Manan Gosalia - Morgan Stanley - Analyst : Zach, can you talk about the confidence around the NII guidance range? It's a tighter range than last year. And I ask because I know there's a lot of uncertainty from trade and immigration and tax policy. So I just wanted to get a sense of what's embedded in that guide from a macro perspective.

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. And you're growing loans faster than deposits this year. It sounds like you're reversing some of the trends that we've seen in 2024. Can you talk about what's driving that? And does that give you more room to flex on deposit costs as you go through the year?

Question: John Pancari - Evercore ISI - Analyst : Related to that growth that you're just talking about on the loan side, can you maybe help us with the new money loan production yield that you're bringing on these new loans at? So overall, new money production yield versus your existing yield? And then maybe more specifically underneath that, what is the new money yield on that $1.1 billion this quarter generated from the new initiatives?

Question: John Pancari - Evercore ISI - Analyst : Okay. All right, Zach. Thank you. And then just hopping to capital. I know the CET1 at 10.5%, that's down to adjusted for AOCI, 8.7%. And I know you're targeting 9% to 10%, including of that. So fair to assume, I know buybacks are still kind of on hold. How long do you see that? Do you see a potential change in that outlook as you look at the capital generation that you're forecasting for the year? Just trying to think how we should think about capital return.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I guess, Zach, just following up on the comments on the loan-to-deposit ratio. As we think about, let's say, loan growth meets deposit growth in '25. Just talk about your expectations around the incremental margin. And what's the incremental cost of deposits that are coming on relative to where you see the rest of the book repricing?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Got it. And I guess just one quick one on the fee outlook around payments, wealth management, cap markets. How much of the fee growth is tied to lending or I'm just trying to think through if lending or loan growth is slower, could you still have a fee revenue backdrop, which could be in line or better than what you've guided this morning?

Question: Brian Foran - Truist Securities - Analyst : I guess (inaudible) definitely recognize that your '25 loan and deposit growth guide, most of your peers so far seem to be like flat, up 2%, so you're continuing peer-leading growth. But just in terms of like it's kind of like flat to decelerating in terms of growth rates from where we are now and conceptually, like why would you decelerate? Is it macro inputs? Or is it seasoning of investments? Or what would -- to the extent the growth rates are flat to decelerating, what would drive that kind of change in the derivative, I guess?

Question: Brian Foran - Truist Securities - Analyst : That's really helpful. Maybe as a follow-up, these eight -- I was going to say eight states and three verticals. The 8 verticals and three states, anything you would highlight as kind of the standout on the good side? Do you think that's been maybe a little bit more challenging? And as you think about investments for '25, is it mostly about continuing to invest in the eight and the three? Or is there anything that could potentially be new verticals or new states on the docket? Stephen Steinour - Huntington Bancshares Inc - Chairman of the Board, President, Chief Executive Officer of Huntington and President and CEO of Huntington Bank Well, Brian, great question. Thank you. We've invested in the core markets as well as these three new geographic markets and then these eight verticals. So we've added several hundred RMs and new business generators in the last 1.5 years. We're very pleased with the overall performance. We've had some outstanding results. We're off to a strong start in both Carolinas and Texas. Our fund finance business has ramped up faster than any business we've had -- any specialty business we've had. They're all doing reasonably well. In aggregate, they're ahead, meaningfully ahead of expectations. But the regional geographies of the Carolinas and Texas on a direct expense basis, all actually made money last year. So we like the start. We're confident. We have excellent colleagues who are -- who have joined us and, and we're well positioned to continue that growth. So organic growth is our priority, and we'll continue to look for growth from those where we've made investments. And at the same time, as you saw earlier this month, we launched two others with Aero & Defense and FIG. And there will potentially be additional specialty verticals as we go forward, probably not at the rate of the last 1.5 years, however.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Steve, just maybe following up on that a little bit on loan growth. You -- in your prepared comments, you said these are some of the most attractive opportunities you've seen since you've joined Huntington and 50% higher pipelines. Can you talk a little bit about the borrower feedback that you're hearing over the last few months? And then if you could touch a little bit also on the core growth, the $3.1 billion in core growth was obviously, much stronger and you guys flagged lower CRE. So just kind of curious if there's a sentiment change and what's driving that core growth? Stephen Steinour - Huntington Bancshares Inc - Chairman of the Board, President, Chief Executive Officer of Huntington and President and CEO of Huntington Bank Jon, the borrower sentiment, the customer center, I should say, is consistently positive. The outlook post-election has changed. You see it in the confidence measures indices that are both consumer and business. And when I'm out, I've probably been out with 100-or-so customers and prospects since the election, and it's almost 100% or more positive about '25 and beyond. So there is a consensus, I think, expected growth, increased inventories. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 17, 2025 / 2:00PM, HBAN.OQ - Q4 2024 Huntington Bancshares Inc Earnings Call We saw record asset finance in the fourth quarter, about $600 million more than we did previously as a record. And I think that reflects sort of an unlocking of expectations. There was a lot of deferred finance activities, I think, in the first half of the year and then waiting to see the election and then decisions were made and significant investments reflected in the fourth quarter. December was a very robust month for us, for example, in the asset finance side. So we're heading in the momentum we have is reflective, I think, of the sentiment and gives us a lot of confidence as we come into the year. In terms of the core growth, again, we have some seasonality in that core growth in the fourth quarter with asset finance and commercial real estate, we believe is close to bottoming out. We're prepared to increase the outstandings and commitments. In CRE, the book has performed exceptionally well. In aggregate, the group is performing exceptionally well. So while we're talking about home growth, we feel the same way about fees and deposits with our 2024 performance. And so we come into the new year with a lot of confidence in terms of our growth.

Question: Nathan Stein - Deutsche Bank - Analyst : This is Nate Stein on behalf of Matt O'Connor. I wanted to ask about the NIM components. In October, you said NIM should be above 3% in the second half of '25, but you're above 3% now. I heard you say modestly lower NIM in the first quarter, but can you elaborate on your NIM outlook for the full year?

Question: Nathan Stein - Deutsche Bank - Analyst : Okay. Great. And then separately, can you talk about the securities repositioning you did this quarter? You sold $1 billion of securities. I guess there was a big march up in the long end of the yield curve, but are you planning on doing more of these repositionings?

Question: Erika Najarian - UBS Equities - Analyst : The question I'm getting a lot from investors, and I'm sure you'll address this at Investor Day, is where are you sort of in the investment cycle? I think that investors have fully embraced the accelerated revenue growth at Huntington and really appreciated that you invested when everybody else was battening down the hatches. And as we think about just going forward, do you feel like the opportunities are still there and that you were going to be at a heavier lift from an investment standpoint for now, and I'm sure we'll hear about it in a few weeks? Or is there sort of a point in time where you feel like you can enjoy widening positive operating because you had so front-loaded the investment spend? Stephen Steinour - Huntington Bancshares Inc - Chairman of the Board, President, Chief Executive Officer of Huntington and President and CEO of Huntington Bank Erika, this is Steve. Thanks for the question. We have momentum in the investment decisions we've made -- or as a result of the investment decisions we've made. And we have been approached on almost all of those specialty businesses, those verticals and essentially the same in the regions as well. So we're seeing business come to us -- business opportunities come to us via a number of avenues, sometimes directly to the management, sometimes through colleagues, but very seldom in the last 1.5 years have we used a recruiting firm for any of our new colleagues and these investments. So there is a list of areas that we've maintained over the years that we have explored. We continue to update that list if we happen to have an approach going forward that we think makes sense or we see an opportunity that makes sense, we will look to pursue that. So we are not at the end of an investment cycle. Having said that, we have significant momentum now and confidence in our growth and the potential because so many of these are relatively new to continue to press forward and we intend to do that. And we'll talk more about it at the upcoming IR Day on February 6. But we're performing exceptionally well. We have momentum the last -- I think, it would be a mistake to pull back prematurely. And I believe we're going to see more opportunity again in '25.

Question: Erika Najarian - UBS Equities - Analyst : You'll leave it alone. Got it.

Question: Brian Foran - Truist Securities - Analyst : I was just trying to wrap my head around provisioning for and reserve build first release in '25. And I know under CECL, it's almost impossible to forecast and guide with any kind of precision. But can you just talk about like where you're -- on the one hand, you got a reserve for loan growth, which is pretty good. On the other hand, I didn't realize until just now, but I mean your criticized assets are now down 20% over nine months, and your reserve is pretty high versus peers, while your charge-offs are pretty low. So kind of where do you see the puts and takes? I mean, should we think about dollars of reserve release in '25? Or is it more about provision that brings the ratio down, but it's a stable reserve in dollars? Or just kind of -- any kind of central tendency that you would give us on whether we should be thinking about reserve release build or somewhere in between?

Question: Brian Foran - Truist Securities - Analyst : That's awesome. And if I could sneak one last one in. I get a lot of questions about if M&A kind of eases, will Huntington be buyer? And I would say with the context, there's three or four other regional banks, five or six even that I cover, who I get the same question, so it's not unique to you. But maybe you could just remind us where you are in terms of deal mode, attractive, unattractive right now on the priority list, not on the priority list. Certainly appreciate you've shown the ability to grow organically and there's a lot on your plate there, but it is something that comes up a lot. Stephen Steinour - Huntington Bancshares Inc - Chairman of the Board, President, Chief Executive Officer of Huntington and President and CEO of Huntington Bank Brian, Steve. Great question. I was wondering when this might come up. We've said over the years that we're very focused on driving top quartile organic growth. We've just made a significant number of investments. And in the core as well as what we talk about with these regional expansions and 8 verticals. So the core also is getting a fair amount of investment. And we're managing expense, Zach has shared this over time, reducing core expense on a continuous basis, through a number of actions and yet investing -- so there's a net expense growth. We really like this equation. We believe we have significant core opportunity growth as well as with these new investments, and we're very focused on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 17, 2025 / 2:00PM, HBAN.OQ - Q4 2024 Huntington Bancshares Inc Earnings Call The business is performing exceptionally well. And we've shown the ability over time to be able to do, I think in the last decade, two bolt-on depository acquisitions, and we're thrilled with Capstone, and they just had a record quarter. So there is a capacity to do things but the priority is organic growth. And as we've said before, we're highly disciplined in the selection. TCF was a home run, nearly $500 million of expense reduction, big revenue generation synergies and some great businesses along with great colleagues. So if it makes sense, we would look, but our priority to be very clear, is organic growth. Thanks for the question.