Huntington Bancshares’ SWOT analysis: stock poised for growth amid challenges

Huntington Bancshares Incorporated (NASDAQ:HBAN), a prominent player in the U.S. banking sector with a market capitalization of $24.7 billion, has been making strategic moves to strengthen its market position and drive growth. Recent analyst reports and company announcements have shed light on the bank’s performance, strategies, and future prospects. According to InvestingPro analysis, the stock currently trades below its Fair Value, suggesting potential upside opportunity. This comprehensive analysis delves into Huntington’s strengths, challenges, and potential opportunities in the evolving financial landscape.

Financial Performance and Outlook

Huntington Bancshares has demonstrated resilience and growth in key financial metrics, generating revenue of $7.1 billion in the last twelve months. The bank’s net interest income (NII) has been trending positively, with recent guidance suggesting flat to modestly higher performance. Trading at a P/E ratio of 12.9x, the stock appears attractively valued relative to its near-term earnings growth potential, as highlighted by InvestingPro analysis. This outperformance is particularly noteworthy given the challenging interest rate environment faced by many banks.

Analysts have noted Huntington’s strong loan growth momentum, which has consistently outpaced peers. In the first quarter of 2025, the bank reiterated its loan growth guidance of +2% quarter-over-quarter. This robust growth is attributed to both core banking operations and new business ventures.

The bank’s net interest margin (NIM) has also shown improvement, performing better than expected. This positive trend in NIM, coupled with solid deposit growth, has contributed to robust revenue trends. Huntington’s deposit base has remained stable, with expectations of at least flat performance compared to previous guidance.

Fee income has been a mixed bag for Huntington. While the bank has experienced some volatility in this area, it has also seen record performance in capital markets activities. For the first quarter of 2025, fee income is anticipated to be around $500 million.

Expense management has been a focus area for Huntington, with projections indicating a 2% decrease in expenses. However, the bank has also seen an increase in revenue-related costs, which may impact overall profitability.

Strategic Initiatives and Growth

Huntington Bancshares has been actively pursuing growth through both organic initiatives and strategic acquisitions, with the stock delivering a 6.5% return year-to-date. The bank’s recent acquisition of VBTX is expected to serve as a catalyst for expansion into the Texas market, increasing its total assets by 6% and doubling its loan presence in Texas from 5% to 11%. The bank’s strong momentum is reflected in its robust financial health metrics available on InvestingPro.

The bank’s management has outlined several organic revenue growth opportunities that could potentially increase revenues from $7.4 billion in 2024 to $11 billion by 2030. These initiatives focus on regional and national business banking, aiming to achieve positive operating leverage.

Huntington’s strategy also includes increasing its national scale. The bank has been expanding geographically and across business lines, showing clear operational momentum. Management appears energized and committed to maintaining strong growth in loans, deposits, and fees while keeping an excellent risk profile.

Risk Management and Asset Quality

Huntington Bancshares has demonstrated a commitment to maintaining strong asset quality. The bank reported a 10% reduction in criticized loans, with office-related criticized loans standing at $1.6 billion, representing about 1% of total loans with an allowance for credit losses (ACL) of 11%.

The bank’s credit quality has remained relatively clean, with management expressing comfort with their risk profile despite a more uncertain economic outlook. Non-performing assets (NPA) and net charge-offs (NCO) have shown improvement, indicating effective risk management practices.

Huntington has also been proactive in managing interest rate risk. The Asset-Liability Committee (ALCO) has increased its hedges to $45.8 billion, an increase of $2 billion, to mitigate potential impacts from interest rate fluctuations.

Capital Management and Shareholder Returns

Huntington Bancshares has maintained a balanced approach to capital management, boasting an impressive 55-year track record of consecutive dividend payments with a current yield of 3.65%. The bank announced a substantial share buyback program valued at $1 billion, representing 5% of its shares, in early 2025. However, the company later decided not to repurchase shares in 2025, signaling a more cautious capital allocation strategy.

The bank’s Common Equity Tier 1 (CET1) ratio is expected to be impacted by the full phase-in of the Current Expected Credit Losses (CECL) deferral, with an anticipated reduction of 8 basis points starting January 1, 2025.

Huntington has set a target for Return on Tangible Common Equity (ROTCE) of 16-17% by 2027, a slight decrease from its previous expectation of 17-19% excluding accumulated other comprehensive income (AOCI) in 2022.

Bear Case

How might rising costs impact HBAN’s profitability?

Huntington Bancshares has been experiencing increased revenue-related costs, which could potentially squeeze profit margins. The bank’s growth strategy, including geographic expansion and investment in new business lines, may lead to higher operational expenses in the short to medium term. If these costs continue to rise faster than revenue growth, it could put pressure on the bank’s profitability metrics and potentially impact shareholder returns.

Additionally, the full implementation of regulatory requirements such as the Current Expected Credit Losses (CECL) standard may lead to increased provisioning, further impacting the bank’s bottom line. The anticipated reduction in the Common Equity Tier 1 (CET1) ratio due to CECL implementation could also necessitate additional capital retention, potentially limiting funds available for growth initiatives or shareholder returns.

What risks does HBAN face in its expansion strategy?

Huntington’s aggressive expansion strategy, particularly its move into the Texas market through the VBTX acquisition, carries inherent risks. Integration challenges could arise, potentially leading to higher-than-expected costs or operational disruptions. The bank may also face difficulties in achieving its targeted synergies or in effectively competing in new markets where it lacks an established presence.

Furthermore, the bank’s focus on increasing its national scale could expose it to new competitive pressures and regulatory scrutiny. As Huntington expands into different regions and business lines, it may encounter varying economic conditions and market dynamics that could impact its performance. The bank’s ability to maintain its strong risk management practices and credit quality across a broader, more diverse portfolio will be crucial to its long-term success.

Bull Case

How could HBAN’s strong loan growth translate to long-term value?

Huntington Bancshares has consistently demonstrated strong loan growth, outpacing many of its peers. This robust growth trajectory could translate into significant long-term value for the bank and its shareholders. As the loan portfolio expands, it has the potential to generate increased interest income, particularly if the bank can maintain or improve its net interest margin.

The bank’s focus on both commercial and consumer lending provides diversification and multiple avenues for growth. If Huntington can continue to grow its loan book while maintaining strong credit quality, it could lead to sustained earnings growth over time. Additionally, the expanded loan portfolio could provide cross-selling opportunities for other banking products and services, further enhancing revenue potential.

What opportunities does HBAN’s expansion into Texas present?

Huntington’s expansion into the Texas market through the VBTX acquisition presents significant opportunities for growth and diversification. Texas has a robust and diverse economy, with strong population growth and a business-friendly environment. This expansion doubles Huntington’s loan presence in Texas from 5% to 11%, providing a solid foundation for further growth in the region.

The Texas market could offer Huntington access to new customer segments, including fast-growing industries and entrepreneurial businesses. This geographic diversification may also help to mitigate risks associated with economic fluctuations in the bank’s traditional markets. If Huntington can successfully leverage its existing strengths and adapt to the local market dynamics in Texas, it could drive substantial long-term growth and value creation for the bank.

SWOT Analysis

Strengths

• Consistent strong loan growth outpacing peers
• Improving net interest margin (NIM)
• Solid and stable deposit base
• Effective risk management practices
• Strong capital markets performance

Weaknesses

• Volatility in fee income
• Rising revenue-related costs
• Potential integration challenges from acquisitions
• Reduced ROTCE targets compared to previous expectations

Opportunities

• Geographic expansion, particularly in the Texas market
• Potential for increased national scale and market presence
• Organic growth initiatives in regional and national business banking
• Cross-selling opportunities from an expanded customer base

Threats

• Economic uncertainty and potential downturns
• Regulatory changes and increased compliance costs
• Interest rate risks and potential margin pressure
• Increased competition in new markets
• Potential credit quality deterioration in an adverse economic environment

Analysts Targets

• Barclays (LON:BARC): $19.00 (July 15, 2025)
• Wolfe Research: $21.00 (July 3, 2025)
• Piper Sandler: $15.00 (April 21, 2025)
• RBC Capital Markets: $18.00 (April 21, 2025)

Huntington Bancshares continues to navigate a complex financial landscape, balancing growth initiatives with risk management and shareholder returns. While the bank faces challenges, including rising costs and economic uncertainties, its strong loan growth and strategic expansion efforts position it for potential long-term success. Investors and analysts will be closely watching Huntington’s ability to execute its growth strategy while maintaining strong financial performance in the coming years.

This analysis is based on information available up to July 18, 2025, and reflects the views and projections of various financial analysts and institutions as of that date. For deeper insights and exclusive analysis of HBAN, including additional ProTips and comprehensive financial metrics, visit InvestingPro. The platform offers detailed valuation models, financial health scores, and expert analysis to help you make more informed investment decisions.

InvestingPro: Smarter Decisions, Better Returns

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