HUNTINGTON BANCSHARES INC /MD/ Q3 FY2024 earnings call

• Driving accelerated loan growth and sustained deposit growth, supported by core businesses and new initiatives like expanded geographies and commercial banking verticals.
• Actively executing down beta playbook in the declining Fed rate cycle, expecting record net interest income in 2025.
• Driving fee revenues higher with momentum in payments, wealth management, and capital markets.
• Strong credit performance with stable net charge-offs and lower non-performing and criticized assets due to disciplined credit management.
• Investments in new markets like Carolinas, and in payments business including bringing merchant acquiring in-house.

Average loan balances increased by $3.7 billion or 3.1% year-over-year. Average deposits grew by $8.3 billion or 5.6% year-over-year. Net interest income expanded by 2.9% and fee revenues increased by 6.5% from the prior quarter. Credit quality remained strong with net charge-offs at 30 basis points. Adjusted CET1 ended the quarter at 8.9%.

• Expect record net interest income in 2025.
• Fourth quarter loan growth expected at approximately 4% to 5% year-over-year.
• Deposit growth expected between 4% and 5% year-over-year.
• Full-year net interest income unchanged from prior guidance range; Q4 NII flat to up 1% year-over-year, then resume growth in 2025.
• Core fee revenues expected to grow at approximately 8% to 9% year-over-year in Q4.
• Core expenses tracking to full-year outlook with ~3% year-over-year growth in Q4.

• Interest rate fluctuations could impact net interest income and balance sheet dynamics.
• Economic changes may affect credit quality and loan performance.
• Execution risks related to new initiatives like merchant acquiring and expansion into new geographies.

Q: The guidance for 4Q NII implies flat to slightly down vs 3Q. What's driving that?

A: Just a short timing difference between reducing deposit costs and variable yield reductions.

Q: Can you share more on deposit growth? Why not pay down higher cost CDs?

A: We're leveraging strong deposit growth to drive down beta, with deposits expected to be relatively flat quarter-to-quarter while driving funding costs lower.

Q: Sensitivity to rate cuts?

A: Less rate cuts would be positively impactful short-term; more rate cuts could have mixed implications depending on reasons.

Q: Traction in Carolinas and deposit growth beyond promotions?

A: Commercial deposit growth is accelerating, with mortgage service vertical driving incremental deposits, expecting more commercial than consumer deposits in 2025.

Q: Clarification on 4Q NII and 2025 NII acceleration?

A: Q4 NII expected flat to up 1% y/y, with NIM expected to expand in 2025 driven by beta accelerating and hedge drag reducing.

Q: Fee revenues performance and credit risk transfer?

A: 12% y/y fee growth, with capital markets driving much of it; CRT transactions are tactical and opportunistic, with core organic earnings driving capital growth.

Q: Auto business trends and credit?

A: Auto production stepped up, with credit performance within historical levels due to disciplined customer selection; charge-offs and delinquencies remain low.

Q: Hedge program adjustments?

A: Continually dynamically managing asset sensitivity, reducing it by over a third in Q3, expecting further reductions by year-end 2024 and mid-2025.