Huntington Bancshares reported a substantial gain in net income Friday, thanks in large part to revenue synergies from its acquisitions of TCF Financial and Capstone Partners.
For the three months ending Sept. 30, net income at the Columbus, Ohio-based bank hit $594 million, a 58% increase from the same period in 2021.
"Obviously, this rate environment is helping the industry and us," Chairman and CEO Steve Steinour said Friday in an interview. "But there's underlying core performance that is very strong. Our lending is strong, both consumer and business."
Steinour also pointed to a third-quarter increase in deposits, which defied the industrywide trend. "We feel very good about the strength and overall position of the bank." he said.
The Federal Reserve's benchmark federal funds rate is now set at 3% to 3.25%, up about 3% over the past year. The increase has made borrowing more expensive, boosting net interest income across the banking industry. At the $179.4 billion-asset Huntington, third-quarter net interest income of $1.4 billion represented a 21% year-over-year increase.
Beyond macroeconomic tailwinds, Huntington's results also benefited from increased revenue linked to its $6 billion purchase of TCF, which closed in June 2021, and its deal for Capstone,
The third quarter was the first that Capstone spent entirely within the Huntington fold. Its impact on the company's capital markets revenue was dramatic. Huntington reported capital markets revenue totaling $73 million for the quarter ending Sept. 30, up 35% from June 30 and 83% from the third quarter of 2021.
"Capstone's deal pipeline is healthy, and we expect it to contribute to additional growth in the fourth quarter," Chief Financial Officer Zach Wasserman said on a conference call with analysts.
That extra capital markets revenue came in handy, as the company reported a 17% year-over-year decline in service charge revenue in the wake of a decision earlier this year to
Other Huntington business lines profited from the expanded footprint that resulted from the merger with TCF — most notably a bigger presence in Chicago along with entry into new markets in Denver and Minneapolis-St. Paul.
Huntington finished the 2022 fiscal year, which ended Sept. 30, as the No. 1-ranked Small Business Administration lender in Colorado and No. 3 in Minnesota. The company's wealth management and asset finance business also reported increases.
The asset finance loan book crossed the $1 billion threshold in the third quarter, while trust and investment management revenues of $60 million were in line with the third quarter of 2021, even though the overall market has fallen into bear-market territory.
Through the first nine months of 2022, however, trust and investment management fee income rose 11% from the same period last year to $188 million.
"The launch of wealth management in the Twin Cities continues to track better than our initial projections," Wasserman said on the conference call. "While it's still early, the team is already contributing to relationship growth."
Huntington also began offering wealth management in Denver during the third quarter, Wasserman added.
Like other banks, Huntington continued to enjoy exceptionally strong asset quality, reporting declines in both nonperforming loans and criticized assets. Net charge-offs did increase, from 0.03% of total loans on June 30 to 0.15% on Sept. 30, but the third-quarter total remained well below Huntington's pre-pandemic target of 0.35% to 0.55%.
Steinour called Huntington's credit quality "extraordinarily good."
"We're not seeing weaknesses emerge," he added. "There's a lot of underlying strength that makes this moment unique compared to prior cycles."
That's not to say Steinour and his team expect the environment to remain this benign. Indeed, the opposite is true.
"We are expecting" the credit situation to deteriorate, Chief Credit Officer Rich Pohle said on the conference call. "The levels of delinquency and the level of charge-offs are really unsustainable."
