Is Huntington Stock Worth Buying on 10.6% Gain in 6 Months?
Huntington Bancshares, Inc. HBAN shares gained 10.6% in the past six months, outperforming its industry’s growth of 9.5%. Meanwhile, HBAN's close peers Comerica Inc. CMA and M&T Bank MTB rallied 17.4% and 15.5%, respectively, over the same time frame.
Price Performance
With a market capitalization of $23.3 billion, HBAN has been making significant strides in its growth strategy and financial performance. Let’s delve deeper to get a clear picture of the bank's growth potential and analyze whether it’s the right time to buy the stock or not.
HBAN’s Growth Strategies and Initiatives
Huntington is executing a multi-faceted growth strategy, which includes expansion in key growth markets, strengthening its commercial banking and Wealth management business and investing in its payments infrastructure.
Expansion in Key Growth Markets: The company plans to expand its banking franchise in North Carolina and South Carolina as part of its multi-year strategy. It aims to hire more than 350 employees across various divisions and open around 55 retail branches by 2030, starting in Charlotte, Raleigh and Winston-Salem in North Carolina, and Charleston, Columbia, and Greenville in South Carolina.
Through geographic expansion, HBAN aims to boost its asset under management (AUM), loans and deposit base by 2030.
Huntington's Geographical Expansion
Expanding Commercial Banking: The bank is actively trying to expand its commercial banking capabilities. In 2023, Huntington announced its commercial banking expansion in Charlotte, establishing five units and 120 relationships with a focus on the middle market, SBA and healthcare lending. The move aimed at tapping into the high deposit levels in Carolinas. In March 2024, it announced plans to grow its commercial banking business in Texas, following its expansion in the Dallas-Fort Worth area in early 2024.
These strategic efforts will boost its commercial banking capabilities, broaden its market presence and attract new customer segments. This will boost loan and deposit growth, along with fee income growth by 2030.
Commercial Banking 2030 Targets
Image Source: Huntington Bancshares, Inc.
Extending Wealth Management Business: HBAN is deepening its customer relationships and expanding in new markets to boost its wealth management business. Within wealth management, the company is expanding advisory household relationships and gathering increased wealth assets from its customers. This will help the company to double its wealth business in the next five years.
Wealth Management Acceleration
Image Source: Huntington Bancshares, Inc.
HBAN to Benefit From Fed Rate Cuts
The Federal Reserve’s aggressive monetary policy easing is likely to support HBAN’s net interest income (NII) over time. The Fed lowered the interest rates by 100 basis points in 2024 and indicated two rate cuts for this year.
The rate cuts are positive developments for HBAN, which is reeling under increasing funding cost pressure. While high rates have led to a significant jump in NII, the same has raised funding and deposit costs, thus squeezing the company’s net interest margin (NIM).
NII recorded a four-year CAGR of 10.5% (2019-2024). On the other hand, NIM declined in 2024 to 3.03% from 3.07% in 2023 because of high funding costs.
For 2025, Huntington projects NII to rise in the range of 4-6% from $5.34 billion in 2024, resulting in record full-year net interest income. This is to be driven by an increase in earning assets and effective interest rate management through flexible hedging strategies.
HBAN’s Solid Liquidity Position
As of Dec. 31, 2024, Huntington's liquidity, comprising cash and due from banks and interest-bearing deposits, aggregated $13.3 billion. It had a total debt (comprising long-term debt and short-term borrowings) of $16.6 billion as of the same date. The company enjoyed senior unsecured notes ratings of A- from Standard & Poor’s and Fitch and A3 from Moody’s. This will likely enable the company to access the debt market at favorable rates.
The company also has a dividend-paying history. HBAN currently pays investors 62 cents per share, or 3.87%, on an annual basis. The company increased its dividend once in the past five years and has a payout ratio of 50%.
HBAN Stock Trades at a Discount
HBAN stock looks attractive from its valuation perspective. The stock is trading at a forward price/earnings (P/E) of 11.16X, a discount compared with the industry average of 11.36X.
Price-to-Earnings
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HBAN is also trading at a discount compared with its peer MTB's P/E multiple of 11.28X and CFR’s P/E multiple of 15.38X.
Is it the Right Time to Buy HBAN Stock?
Huntington is leveraging robust liquidity to execute organic growth initiatives inclusive of new geographies and commercial verticals to gain market share and increase profitability. Also, its high-quality loan growth and expanding deposit balance positions it well for growth in the upcoming period. Further, the company’s efforts to boost NII will aid its financials.
Sales Estimates
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Earnings Estimate
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However, Huntington is facing a steady rise in expenses. Its non-interest expenses recorded a CAGR of 10.9% over the last five years (ended 2024). As the bank continues its expansion efforts and invests in growth initiatives, operating expenses may rise faster than revenue growth. This could lead to a squeeze on profitability. Moreover, while Huntington's expansion strategy, particularly in the Southeast, looks promising, it also carries inherent risks. Entering new regions requires significant resources and may face stiff competition.
Hence, investors should keep Huntington's stock on their radar and analyze how the company navigates rising expenses and stiff competition to optimize long-term gains.
HBAN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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