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Investing.com - DA Davidson has reiterated a Buy rating and $18.00 price target on Huntington Bancshares (NASDAQ:HBAN), currently trading at $16.92, following the bank’s announcement of an all-stock acquisition of Veritex (NASDAQ:VBTX) for $1.9 billion. The bank, with a market capitalization of $24.7 billion, has demonstrated strong momentum with a 29% return over the past year. According to InvestingPro analysis, HBAN appears undervalued at current levels.
The transaction will double Huntington’s presence in Texas, which the research firm describes as "an important growth market" for the bank. Veritex, with $13 billion in assets, represents a relatively small addition to Huntington’s $210 billion asset base.
DA Davidson noted the acquisition is "attractively priced" and should be neutral to earnings at closing. The deal is expected to be approximately $0.50 dilutive to tangible book value with a one-year earnback period.
The research firm believes the transaction "makes a great deal of sense" and presents "relatively low risk" for Huntington. Despite management previously indicating M&A was not a high priority, DA Davidson suggests this specific acquisition aligns with the bank’s strategic goals.
The acquisition is not expected to disrupt Huntington’s organic growth initiatives and should help accelerate its expansion in the Texas market, according to the research firm’s analysis.
In other recent news, Huntington Bancshares has agreed to acquire Veritex Holdings in an all-stock transaction valued at $1.9 billion, expanding its presence in Texas markets such as Dallas, Fort Worth, and Houston. This acquisition will add approximately $13 billion in assets, $9 billion in loans, and $11 billion in deposits to Huntington’s balance sheet, with the transaction expected to close in the early fourth quarter of 2025. The deal is projected to be accretive to earnings per share and neutral to capital at closing, although it may slightly dilute tangible book value per share with an estimated payback period of about one year.
Analysts have weighed in on these developments, with Keefe, Bruyette & Woods (KBW) reiterating a Market Perform rating, highlighting the strategic Texas expansion over immediate financial gains. Morgan Stanley (NYSE:MS) also maintained an Overweight rating, emphasizing the strategic value and modest near-term financial benefits of the Veritex acquisition. Wolfe Research upgraded Huntington Bancshares to Outperform, citing confidence in the bank’s net interest margin expansion potential and significant growth in loans and deposits since the March 2023 banking crisis. These recent developments reflect Huntington’s strategic maneuvers and analysts’ varied perspectives on its future prospects.
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