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Though Huntington, Fifth Third Bancorp and KeyCorp all reported relatively strong earnings, organic loan growth weakened amid continued uncertainty about the direction of the economy.
October 18 -
Stephen Steinour, chief executive of Huntington Bancshares (HBAN), quickly sought to rebalance Wall Street's view of his company Thursday.
The Columbus, Ohio, bank reported its most profitable quarter since 2007 but all investors saw was a 4 basis-point slide in its net interest margin in the third quarter. Huntington's shares fell more than 6% on Thursday, to $6.61.
Steinour stressed the $56 billion-asset company's profit gains and sought to put its margin into context.
"We've been saying for the year that the margin [would] be flat to down for the year," Steinour said in an interview. "It is up year over year. That reflects the efforts in managing our asset yields and our cost of funds. We're doing things to manage the margin as effectively as we can."
The share prices of Huntington
As of Thursday, Fifth Third was trading at 124% of tangible book, Huntington at 117% and Key at 94%.
Huntington's net income of $167.8 million was its highest quarterly profit on record, Steinour said. Quarterly profits rose 10% from the prior quarter and 17% year over year.
Its returns on assets rose 9 basis points to 1.19%, its highest since the second quarter of 2007, according to Bloomberg data.
And it margin was relatively stable compared with a handful of other regional banks that reported earnings this week, Steinour noted.
Huntington's margin was 3.38%, down from 3.42% in the prior quarter and up from 3.34% a year earlier.
Its strategy for dealing with the low interest rates all banks are struggling with involves lowering funding costs and staying liquid, as Steinour is betting rates have bottomed out.
"We may be holding more cash. We're trying to stay very short on our investment portfolio," Steinour said. "We don't want to be caught" holding lots of long-dated, low-yielding securities when interest rates eventually rise.
Positive funding trends should mitigate margin pressure during the last three months of the year, Steinour said. Its funding fell quarter to quarter and year over year because of runoff in costly certificates of deposits and core deposit growth. Tepid loan demand is its main hurdle to improving margins.
Burgeoning political and economic concerns have business borrowers in particular putting off investment decisions until next year, he said. Huntington's average loans fell 10% on an annual basis from the prior quarter, to $40.1 billion.
"What we're seeing is some deferrals," Steinour said. "I don't think the demand has gone away. … There may be a quarter two in which [lending growth] will be suspended and reduced."
Huntington's revenue of $681 million rose 1% from the prior quarter and 4% from a year earlier, largely because of mortgage and securities sales gains.
