Banks Need Washington to Boost Business Confidence: Huntington's Steinour

If you talk with chief executives like Huntington Bancshares' Stephen Steinour about the economic challenges evident in the fourth quarter, the conversation undoubtedly will drift to the strong year overall.

"Our loan growth for the year was phenomenal," Steinour, the chairman and CEO of Huntington (HBAN), said in an interview, noting with characteristic enthusiasm a nearly 10% expansion in commercial loans in 2012.

Still, the Columbus, Ohio, company's overall loan portfolio expanded at an annual rate of 3% in the fourth quarter. The $56.2 billion-asset company's press release also included hints of caution, noting the brakes put on by "hesitant" business customers.

"It was very clear, beginning in the middle of the third quarter, businesses were starting to defer decisions, starting to defer investments," Steinour said in an interview. "To some extent, that is still continuing."

The onus remains on policymakers in Washington to resolve economic question marks that the short-term deal on the fiscal cliff only postponed, he said.

"As soon as we get beyond the theater in Washington around cliffs and other things …I think there is a wave of pent-up investment that will come through," Steinour said. "When we get horizons around which businesses can plan established, I think that growth, that investment, will occur."

In the meanwhile, economic forecasts for 2013 range from a recession to 3% growth in the gross domestic product. "It's extraordinarily broad and uncertain right now," he said of economists' forecasts. "Our politicians need to deliver stability."

Huntington's fourth-quarter earnings were relatively flat from the third quarter but rose 32% from a year earlier, to $167.3 million. At 19 cents a share, the quarter surpassed the average analysts' estimate by three cents, according to Bloomberg.

Revenue rose 6% from the third quarter and 14% from a year earlier, to $732.2 million.

Noninterest expense increased 6% in 2012 compared to a year earlier, to $1.8 billion. A big component of that increase took place in the third quarter, when Huntington completed a capital plan for the Federal Reserve Board that included $5 million in expenses for accountants and programmers, Steinour said.

Still, in uncertain times, Huntington and other banks have to stay on top of expenses and make sure they grow slower than revenues do.

"We have to manage expenses," said Steinour, noting previously announced plans to close 12 branches, including nine this quarter. "We have to constantly be at it."

Steinour is hopeful that Washington will act, and that the economy will pick up, though the momentum may not occur until the second quarter or later, he says. Huntington's home turf, the Midwest, will surge, especially in the manufacturing, healthcare and energy sectors, he says. "It's ready to significantly move forward," he said.

Until then, Huntington has "moderated" its investment in its business and will kept focusing on adding checking customers, Steinour said. Net interest income is expected to "modestly grow" this year, the company said in its press release Thursday.

"I expect it to be a robust year on the whole" once the economic and political uncertainty clear, he said.