It grew its loan portfolio and further boosted deposits. But, in an era of lofty interest rates, lending activity is slowing and funding costs are mounting, lowering net interest income growth projections for the second half of 2023.
The $188.5 billion-asset bank on Friday said its second-quarter average loans grew nearly 1% from the prior quarter, bolstered by gains across its commercial lending lines. Credit quality remains solid, with net charge-offs of just 16 basis points. Charge-offs were down 3 basis points from the first quarter.
"We are investing in the business to drive long-term, sustainable revenue growth," Chairman, President and CEO Stephen Steinour said on the company's earnings call. "We can be nimble and seize on opportunities to expand our business that will arise
But Steinour also said
The regional bank said dozens of new hires give it a major presence on both coasts, and it plans to build out its team of advisors and its private banking products.
Deposits, meanwhile, increased about 2% from the previous quarter, supported by growth in consumer accounts. "We saw sustained growth in deposit balances throughout the second quarter," Chief Financial Officer Zachary Wasserman said during the company's earnings call.
But
As a result, the bank's net interest margin contracted by 29 basis points during the second quarter to 3.11%.
Deposits are expected to creep up further in the second half of 2023, as Huntington works to meet its guidance of full-year average deposit growth of 1-3%. It narrowed its average loan growth target range from 5-7% to 5-6%, however, amid expectations for tougher regulations and lighter loan demand in the current quarter and the final three months of 2023. In turn, the bank lowered its full-year net interest margin projected growth range from 6-9% to 3-5%.
"On the one hand, Huntington highlighted its balance sheet strength as putting it in a position to play offense. On the other hand, they have some caution as regulation comes down the pipe and funding costs rise," said analyst Brian Foran of Autonomous Research. "So all in, they point to loan growth of only 1% in the back half of the year, and it sounds like they are looking to pick their spots."
Huntington reported second-quarter net income of $559 million, compared with $539 million a year earlier. It posted earnings per share of 35 cents, flat with the second quarter of 2022.
The company on Friday also said that Rich Pohle, its chief credit officer, plans to retire at the end of 2023. He will be succeeded by Brendan Lawler, Huntington's current deputy chief credit officer.
