Huntington Bancshares at Morgan Stanley Conference: Strategic Growth Insights

On Wednesday, 11 June 2025, Huntington Bancshares Incorporated (NASDAQ:HBAN) participated in the Morgan Stanley US Financials, Payments & CRE Conference 2025. The company’s CFO, Zach Wasserman, highlighted Huntington’s strong Q2 performance and strategic growth initiatives, while addressing both positive developments and challenges. Huntington is outpacing peers in loan and deposit growth, and its strategic expansion into new geographies is proving fruitful.

Key Takeaways

• Huntington Bancshares is exceeding its peers in loan and deposit growth, driven by core business expansions.
• The company anticipates a net interest margin (NIM) 2-3 basis points above previous forecasts for Q2 and the rest of the year.
• Fee revenue is rising, particularly in payments, wealth management, and capital markets.
• Huntington is committed to risk management, maintaining stable credit performance and strong loss coverage ratios.
• The company plans to achieve its CET1 operating range of 9% to 10% by mid-year, potentially allowing for share repurchases.

Financial Results

• Loan and Deposit Growth:

- Loan growth surpassed peer median by over 8 percentage points over the past five quarters.

- Loan balances increased by approximately 2 billion dollars in the first two months of Q2.

- The deposit base grew by about 1.8 billion dollars so far in Q2.

• Net Interest Margin (NIM):

- NIM is expected to trend 2-3 basis points above the prior expectation of 3.07% for Q2 and the remainder of the year.

- A rising NIM is forecasted into 2026.

• Fee Revenues:

- Fee income grew about 6% year-over-year in Q1.

- Core fees for Q2 are expected to maintain this pace, driven by wealth assets under management and capital markets performance.

• Credit Performance:

- Charge-offs are expected to remain near Q1 levels of 26 basis points for Q2.

- The criticized loan ratio is expected to normalize lower from Q1 and remain within the recent range for the remainder of the year.

• Capital and Expenses:

- The company generates approximately 40 basis points of capital each quarter.

- Adjusted CET1 is expected to be in the operating range of 9% to 10% by mid-year.

- Operating expenses for Q2 are estimated to be slightly above 1.2 billion dollars.

- The company expects to generate positive operating leverage this year.

Operational Updates

• Geographic Expansion:

- New markets in North and South Carolina and Texas contributed to loan growth.

- Approximately 70 bankers and dozens of support staff were hired in North and South Carolina.

- A middle-market commercial banking team was established in South Florida.

• Commercial Verticals:

- Expansion of the financial sponsors group to drive advisory, syndication, and other capital market services.

- Exit from the healthcare asset-based lending vertical due to increased industry leverage exceeding risk tolerance.

• Risk Management:

- Risk management is integral to the company culture, with disciplined client selection and rigorous portfolio management.

- Proactive monitoring of portfolios for potential impacts from economic factors.

• Investments:

- Significant investments in payments, wealth management, and capital markets businesses.

- Increased efficiency in risk management through technological innovation.

Future Outlook

• Loan Growth:

- Anticipates being at the high end of the loan growth guidance of 5% to 7%, with potential for an increase.

• Net Interest Margin (NIM):

- Expects a relatively flat NIM through 2025, with an upward trajectory into 2026.

• Expenses and Capital:

- Plans to drive positive operating leverage this year and in 2025.

- Continues to view the stock as undervalued, making share repurchases an attractive opportunity.

- Consistent long-term revenue growth and an improving ROTCE profile are expected.

Q&A Highlights

• Loan Growth Trends:

- Growth momentum is expected to sustain into the latter half of the year, with minimal impact from environmental uncertainties.

• NIM Drivers:

- Liability cost reduction and deposit pricing actions are key drivers for the improved NIM outlook.

• Asset Sensitivity:

- Managed with an algorithmic approach to anticipate interest rate paths effectively.

• Securities Portfolio Repositioning:

- Approximately 900 million dollars of corporate securities were repositioned, yielding about 340 basis points.

• Fee-Based Businesses:

- Success is attributed to execution and effective channel management.

For a more detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Morgan Stanley US Financials, Payments & CRE Conference 2025:

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Up next, we have Huntington Bank. I’ll get our disclosures out of the way For important disclosures, please see the Morgan Stanley research disclosure website, morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that out of the way, we’re delighted to have with us today Huntington’s chief financial officer, Zach Wasserman.

Zach, welcome back, and thanks so much for joining us.

Zach Wasserman, Chief Financial Officer, Huntington Bank: Thank you, Thanks for having us.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So, Zach, I know you have a few prepared remarks. I’ll hand it over to you, and then we’ll move into q and a.

Zach Wasserman, Chief Financial Officer, Huntington Bank: Terrific. Well, good morning, everybody. And again, thank you, Manon and Morgan Stanley, hosting us. I’m pleased to share an update on Huntington’s accomplishments in the second quarter and detail our progress toward our goals we articulated at our Investor Day in February. Before we get started, please review slide two, which applies to forward looking statements we’ll make today.

Let’s start on slide three. During Investor Day, we presented an updated vision to be the leading people customer centered bank in the country By delivering on expertise and advice, by putting the customer at the center of all that we do, we will become an indispensable partner to our customers. This leads to both continued customer acquisition and further deepening of primary bank relationships, which will drive top quartile performance for our stakeholders. Turning to Slide four. There are four key messages I would like to share with you today.

we continue to deliver on the organic growth strategies we discussed during our Investor Day within our aggregate moderate to low risk appetite. we are driving robust profit growth, supported by both our core business and the new initiatives we’ve launched over the past two years. strong credit performance continues to be a hallmark of Huntington, and the growth we’re driving occurs within our long standing risk framework. And we are well positioned to outperform through a range of economic conditions because of our rigorous adherence to this risk framework. Within the past two plus years, while the past two plus years have been challenging for the industry, Huntington has outperformed in this period in large part because of our risk management philosophy, particularly around capital liquidity and credit management.

Moving on to slide five. Over the past five quarters, we’ve consistently delivered peer leading loan and deposit growth. Through the first quarter of this year, cumulative loan growth was 7.3%, over eight percentage points better than the peer median. This growth has been evenly balanced between our core and our expansion into new geographies and commercial verticals. In the first quarter of twenty twenty five, the core businesses contributed approximately 50% of the growth.

The remainder comes from the extension of our geographic footprint, particularly in North and South Carolina and Texas and the expansion of our commercial verticals. This momentum has continued through the two months of the second quarter as we’ve grown our loan balances by approximately $2,000,000,000 driven by middle market commercial and industrial, indirect auto and residential mortgage. We’re also seeing continued contributions from numerous product areas within our new geographies of North and South Carolina and Texas as well as continued growth from the new commercial verticals, validating our expectations about their potential. We have also successfully grown our deposit base so far this quarter by approximately $1,800,000,000. As volumes grow, we’re being intentional about driving down deposit costs, and these lower funding costs are expanding our NIM.

We now expect NIM to trend two to three basis points above our prior expectations of about three zero seven basis points for the for the second quarter and for the remainder of the year. We also continue to forecast a rising NIM into 2026. The outcome of this loan and deposit growth and higher NIM is we expect to have stronger spread revenues than our prior expectations, both this quarter in Q2 and for the remainder of the year. Turning to Slide six. Fee revenues is another area in which we are driving outperformance in areas of strategic importance, particularly payments, wealth management and capital markets.

In the first quarter, fee income grew about 6% year over year, and we expect core fees for the second quarter to sustain that pace. This is driven in part by continued growth in wealth assets under management and by capital markets performance that rebounded strongly after a slow April and has exceeded our expectations for q two. Based on our continued investments in these areas, we expect additional momentum into the second half of this year and into 2026. Turning to slide seven. Importantly, all of this growth is occurring within our aggregate moderate to low risk appetite.

Risk management is a core part of our culture. As we say within the company, everyone owns risk management. This shared ownership ensures early alignment between our strategy, our risk tolerance, and the execution of our growth initiatives. In credit, we applied disciplined client selection and rigorous portfolio management. This results in consistent top quartile performance in net charge offs and one of the strongest loss coverage ratios in the peer group, trends we expect to carry over into this quarter.

For Q2, we expect charge offs near our first quarter level of 26 basis points. We also expect our criticized loan ratio to normalize lower from the first quarter and remain within the recent range for the remainder of the year. Naturally, we continue to rigorously monitor all our portfolios. Given the uncertainties in the macro environment on tariff policy, interest rate outlook and inflation. On the consumer side, we’re not seeing much change in behavior.

Similarly, anecdotal conversations with our commercial customers indicate that they’re generally in solid positions, continuing to respond to current demand even as they also cautiously watch for resolution around key economic uncertainties. Even so, we remain proactive in our approach to credit management. For example, we recently stressed our portfolio for a range of tariffs and other effects, and the results were consistent with our expectations. Turning to Slide eight. We remain very excited about our opportunity set, both within our geographic markets and across our specialty commercial verticals, many of which have national scope.

We believe these factors will support above peer loan, deposit, and ultimately revenue growth for the foreseeable future, And we remain confident that our growth conforms within our risk tolerance. Why are we so confident about this? Because our risk discipline is the foundation of all that we do. For example, when we enter a new geography, we start by hiring a team of bankers with a long track record of success within their local market, and we impose our underwriting and risk framework without exception. Additionally, we hire local credit officers who know that market and have a separate reporting line into our risk organization.

Our mix of national capabilities and local presence has made us a partner of choice for high quality bankers. For example, when we were seeking to launch in the Carolinas, we identified 25 highly experienced bankers that we wanted to hire, and we set a plan for ourselves to accomplish that hiring over six months. What actually happened is we hired 24 of them in six weeks, and we now have approximately 70 bankers and dozens of support staff in North and South Carolina. We remain opportunistic in this approach. We hired our middle market commercial banking team in South Florida a few weeks ago, giving us a toehold in another fast growing region with an attractive local geography.

I can highlight a similar point about the expansion of our commercial verticals, which spans several specialty areas. As an example, we continue to build out the financial sponsors group that we discussed at Investor Day. We remain very excited about the opportunity to expand our integrated sponsor value proposition to drive advisory, syndication and other capital market services to this rapidly growing client segment, earning us value added fee revenues without additional substantial risk on our balance sheet. All these activities are governed by our commitment to allocate capital with discipline and are guided by a clear eyed view of risk adjusted returns. And we’ll not hesitate to pull back when these returns fall outside of our parameters.

For example, we exited our health care asset based lending vertical earlier this year when industry leverage increased to a level that exceeded our risk tolerance. Turning to slide nine on capital. Our approach to capital management is informed by our strategic priorities and is consistent with our focus on generating attractive growth and returns. Given our strong return on capital, each quarter, we generate approximately 40 basis points of capital. About half is allocated to fund our high quality, high return loan growth.

The remainder supports our dividend and goes toward increasing our capital base as we drive adjusted CET1 inclusive of AOCI into our operating range of 9% to 10%. We expect adjusted CET1 to be in the operating range by the middle of this year. This will open up the opportunity for us to consider other uses of capital, including share repurchases. Our strong financial condition and operating momentum give us the flexibility to be opportunistic. Given the recent moves in rates and security spreads, we identified the opportunity to tactically restructure a portion of our securities portfolio this quarter.

We sold the majority of our corporate bonds and reinvested the proceeds into much higher yielding lower RWA securities. We estimate this action will reduce Q2 earnings by $03 per share with an immediate benefit, an increase of six basis points to adjusted CET1 and an attractive payback profile that will add approximately $20,000,000 per year to securities income, benefiting revenue, NIM, and ROTCE beginning in the back half of this year and into 2026. I realize I’ve covered a lot of ground, so let me summarize, beginning with our current views on q two, which we think is shaping up very well. Firstly, we’re driving strong loan, deposit and fee income growth from our core and expansion areas. Our actions on deposit pricing are contributing to a three a two to three basis point higher NIM outlook.

All these factors support very strong revenue trends that exceed our prior estimates. We continue to invest in key areas with meaningful long term growth opportunities in North and South Carolina, Texas, our commercial verticals and our expanding financial sponsors group and our new Florida middle market team. Given revenue outperformance for both Q2 and the remainder of the year, I naturally expect expenses to be somewhat higher than prior expectations, largely from revenue driven compensation. For the second quarter, we estimate operating expenses will be a touch above 1,200,000,000 However, there’s no change to our expectation that we will generate positive operating leverage this year. We continue to expect credit performance to be stable with net charge offs likely similar to Q1 levels.

And finally, we estimate that the sale of the corporate bond portfolio reduced Q2 EPS by $03 per share, but aid in ROTCE, NIM and earnings per share into the back half of this year and 2026. Turning finally to Slide 10. In conclusion, we have clear objectives that will drive value creation. We’re confident in our revenue momentum and expect to drive positive operating leverage as well as our approach to risk management, which is supporting stable credit performance. While uncertainty remains in the economic outlook, we remain confident that the breadth of our businesses present expansion opportunities for consistent long term revenue growth.

We believe our approach will result in sustained tangible book value per share accretion and an improving ROTCE profile and will remain a powerful framework for equity value creation. With that, let me turn it back over to Manon.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Perfect. Thanks for that. You know, there’s there’s certainly a lot to dig into there. Maybe to start, Huntington has been able to outpace the broader industry on loan growth by a wide margin. I think you mentioned eight percentage points on a cumulative basis.

Can you elaborate on some of the trends you’re seeing so far this quarter and how you’re seeing things trend into the end of this year?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Sure. Just starting with kind of the trends within Huntington, and I’ll broaden out to the kind of what we’re seeing from customers. I think as noted in the April earnings call, we were carrying a tremendous amount of growth momentum from the first quarter that we expected to sustain into the second quarter, and we were really pleased to see that. In fact, beating our own expectations, growing at the higher end of our loan growth guidance for the second quarter and obviously, really nice growth in deposits also. So that’s really, really good.

And pipelines continue to indicate that we can continue to see that growth continue into the back half of the year. We’ll give more updated guidance as we come into the July earnings call. But at this point, our working assumption is that we’ll at least be at the high end of our loan growth guidance of 5% to 7%, potentially raising that, we’ll see as the quarter finalizes here. But feel pretty good about the outlook. The pipelines continue to look pretty strong.

If I think about of course, there are uncertainties in the environment. And I would characterize the impact that we’re seeing on our business at this point as marginal, not impacting the the the growth on the whole, but at the margin. There’s a couple example points I would share. One is we’re seeing sort of the kind of the the most broad based impact is just a slowing of decision making in certain segments and for certain customers. For example, in our regional banking business that supports customers between 5,000,000 and $50,000,000 of revenue, we’re seeing about a six day longer closing process for loans, which is maybe on the order of 10%.

With that being said, again, pipelines are kind of building up for potential closure thereafter, so somewhat sanguine view. Other areas that support inventory floor planning for goods that have a fair amount of foreign sourced content to them, Our distribution finance business, our auto floorplan business, we’re seeing somewhat lower inventory levels and floorplan levels than you would expect normally at this time of the year. M and A advisory has remained reasonable for the second quarter, but not at the kind of torrid pace we were seeing in the fourth quarter. And we are seeing deals closed, but also a fair amount that are waiting for some final resolution around uncertainty. So marginal impacts, but not denting the growth on the whole.

As I just lastly turn to customers, and I said this in the prepared remarks, generally speaking, and I’ve talked with a lot of our bankers and customers to get a sense of this, I would characterize it that commercial customers that we deal with are seeing their own position as quite solid. They’ve got strong capital levels. They’ve got strong liquidity. To some degree, they’re they’re fairly battle tested having gone through COVID and higher inflation and higher interest rates. And to some degree, they anticipated that there would likely be some degree of tariffs and and planned ahead for that.

And and so I think, you know, they’re just kind of watching for final resolution around around these tariffs. I I think there’s a there’s a view generally that if there was clarity around, the the ultimate, landing point for tariffs, that they’ll be able to adjust their pricing, adjust their business models to be able to to work through it. And from what we’re seeing broadly in the economy and our footprint, we we still see economic growth.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So let’s talk about, loan growth for a minute more. You know, as I talk to investors, there’s there’s two sides of the of the bull bear debate on loan growth. You know, on one hand, given your strong q one, things are clearly going well in February, that the the the loan growth guidance appears conservative, while on the other hand, some investors wonder if you’re extending on risk. And I know you covered this a little bit on the in the in the slides, but can you what do you say to that?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Yes. Look, I think in terms of the on the growth side of that, this growth is the outcome of our strategy and our investments that are really working. It’s just a it’s a manifestation of excellent execution. Business is performing exceptionally well right now across the board. And so this is what you’d expect.

Our core is growing. We never pulled back on lending and growth activity, which others in the industry did. And so that’s benefiting us now with continued momentum out of twenty twenty four and 2025. And on the new expansion areas, driving growth from those areas is what you’d expect to see given the investments we’ve made and obviously executing on that. So I don’t think there’s that much of a surprise in it, and we’re continuing to see strong marginal returns as we noted, and it’s pretty in the results we’re posting.

In terms of the risk side of that, I’ll just reiterate what I said in the prepared remarks. We don’t modulate our risk posture one iota when we enter these new geographies or verticals. And really, the foundation of our growth is that we can find a team that will run that business, that is deeply experienced in the market and that is aligned with our risk culture and our credit and underwriting philosophy. And we’ve got risk personnel as well in the market that really know that segment or or that geography. So I think that the customers we’re winning in these new these new areas are gonna be some of our best that we’ve got.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So so you’re leading with a brand, with a product set, that that’s how you’re able to get these these new clients and these new verticals and new geographies?

Zach Wasserman, Chief Financial Officer, Huntington Bank: No. And and a differentiated approach where we’re we’re very much focused on local relationships, but then bringing the verticalized expertise, the capital markets capabilities, the payments capabilities of a very large bank to bear there. And that is you know, I think we’re seeing a a very strong receptivity to that model.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So let’s pivot over to the drivers of NIM. Huntington has executed well on the down beta playbook that you’ve spoken about before. How are you thinking about the NIM dynamics over the next several quarters? You know, you cited factors in support of 2Q with deposit costs coming down. There’s also the securities repositioning.

How much of that 2Q outlook is sustainable going forward?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Yes. I feel great about the NIM outlook. And as I noted, sort of ratcheting that higher by around two or three basis points this year and for the balance of this year for this quarter and for the balance of this year, I continue to expect to see a generally relatively flat NIM at that level through 2025 and then a rising trajectory for NIM into 2026. And if anything, our kind of conviction around that has only grown as we’ve continued to see progress on the plan here. The biggest driver, as I noted for that ratcheting up of NIM outlook in the near term, is liability cost reduction and execution of the deposit pricing actions, which is very encouraging and is exceeding our own internal plans.

As you and I would note that we’ve brought asset sensitivity to about neutral in the second quarter. And while this is an area that I look at almost weekly potentially to always recalibrate our hedge position to be what we think is optimal to protect the company over the longer term, if the environment was to stay generally as is forecasted to be now, I would expect to stay relatively neutral in asset sensitivity through the end of this year before probably likely increasing in asset sensitivity into 2026. So I think that posture allows us to maintain that really strong and stable NIM in an environment where there’s a hire for longer and there’s no rate reductions or one where there’s several rate reductions this year. And, you know, I think that that’s a that’s a fairly helpful place for us to be in. If I think about the drivers of why we’ll see NIM rise as we go throughout the course of of of the end of this year into next year, and foremost, it’s fixed asset repricing.

We continue to benefit from that on a cumulative basis, something like 12 basis points pickup of NIM last year, on the order of roughly 10 this year, continuing into 2026 and even into 2027. The the other factor, I do expect to see continued reduction in liability and deposit costs even in the no cut scenario and certainly more in a in a in a scenario where there’s reductions and and, you know, a bit of hedge drag reduction into the second quarter as well.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So so to reiterate, you you feel confident about this under a variety of different rate scenarios?

Zach Wasserman, Chief Financial Officer, Huntington Bank: We do.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Perfect. Moving on to expenses. You’ve been investing a lot, generating strong revenue growth. But how should we be thinking about this new expense base? Are you confident you’ve got all the new levers to continue to generate positive operating leverage from here?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Really are. So and as I noted in the prepared remarks, expect to drive positive operating leverage this year in 2025. And we do long range financial planning, which we do very rigorously on a continued basis, I am planning for positive operating leverage in each of the next years in our long range planning cycle as well. The model that we have and I noted this in the Investor Day, some people may have picked up on it, others may not have, but I genuinely believe that the model for expense management we have is the secret sauce behind the exceptional level of growth that you’re seeing. Each year, we target to reduce our baseline operating cost by about 1%, driving process reengineering, organizational simplification, automation, outsourcing for low cost locations, going forward more and more around Gen AI and and AgenTeq efficiency opportunities.

You know, in the last five years, each year, we’ve taken out approximately 1% of the expense base, and I expect that to be very sustainable in the future to continue to do that. And then we plow that that savings back into investments. I mean, just the last two years, 25% CAGR in investments in technology, digital capabilities, in in marketing to acquire customers and to deepen relationships and the addition of personnel to go and build these new businesses. So that is really working. That model is exceptionally strong.

And we calibrate it ultimately to ensure that we’ve got the jaws of positive operating leverage. And so I feel very sanguine about that. I’ll tell you now as I as I work with with the management team, we’re now focused on executing that for 2027. We’ve already got ’25 and ’26 in the box.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Alright. Perfect. Let’s pivot over to the balance sheet. You spoke about managing the asset sensitivity closer to neutral. Just given the volatility on the long end of the curve, how are you thinking about positioning your asset sensitivity in response to that, the belly of the curve and the long end of the curve?

Yep. And what are the implications for your ability to achieve your adjusted CET1 target, including AOCI?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Yeah. Great great questions. And, you know, I’ll I’ll share with you that the the the philosophy we have around managing asset sensitivity is very much an algorithmic approach, where we’re trying to continually discern the most likely path of interest rates over the next several several years and calibrate the hedge posture to be as efficient as possible to achieve the dual mandate of protecting capital against the up rate scenarios, protecting NIM against down rate scenarios. And so, this is not an easy process. It’s one of kind of continual adjustment to the most likely range.

I will corroborate the point of your question, which is the potentialities for a higher for a longer and potentially even higher longer term rates, in our view, has risen over the last several months just given some of the market dialogue and and economic drivers we’ve seen. With that said, we’re not rushing into any kind of change in posture. And and I do think, you know, sort of the the natural state of the asset sensitivity profile is modestly asset sensitive. And if if left to its own devices, would see asset sensitivity growing into twenty twenty six, which would provide up rate protection. We may desire to to change that synthetically, and and we’ll we’ll continue to work through that and and share that as we as we go.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Can you walk us through the strategy behind the securities portfolio repositioning? You know, the question there is why now? How much more do you have left to do? Would you do anything else in the near future?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Yep. Great question. You know, it all starts with a view that we always wanna keep Huntington strong in a position to seize these opportunities when when when they come to us, and so we’re really pleased to be able to do that this quarter. A great opportunity to reposition about $900,000,000 of corporate securities, pick up about three forty basis points of yield on that trade and actually benefit adjusted CET1 by six basis points in the quarter. Of course, there’s a near term earnings impact from that of around $03 but we’ll pick up about a run rate of a penny per year thereafter, dollars 20,000,000.

That will benefit NIM, benefit return on tangible common equity, benefit earnings, and we think it’s a really smart, decision. There’s nothing else that we’re planning in the near term, but we remain opportunistic. And I think if there’s really attractive opportunities, you know, we we may pursue them, but there’s nothing else that we’re evaluating this time.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So when you think about that CET one including AOCI, I think you’ve spoken about it being in the nine to 10% range. And I and you are at about 8.9% right now on that number. How should investors think about the trajectory of your capital ratios? You know, I know you spoke about earnings, well, earnings minus dividends minus growth being about 10 ish basis points or so of accretion. Can you talk a little bit more about the pathway there?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Sure. I think if you just think about the capital posture for the company, it really is unchanged from the way we’ve discussed it on numerous occasions as of late, which is, you know, accrete approximately 40 basis points of capital per quarter, generate that on a gross basis given our strong return on capital and then invest the lion’s share of that into organic growth. And we’re thrilled to be able to do that. The returns we’re seeing at the margin are quite good, that’s our top priority. You know, support the dividend.

It’s it’s just under 4% right now. It’s a very attractive yield. I think that that leaves leftover around five to 10 basis points, as I noted. And so we’ll continue to see adjusted CET1 rise modestly. I think we’ll cross into the operating range of nine percent to 10% by the middle of this year.

And then that will open up other potential opportunities. We continue to view the stock as undervalued, and so certainly an attractive buyback opportunity. And that that will be a I’d say that has traditionally been a lever that we’ve used for shareholder return, and and I would expect it to be so in the future again.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So maybe pivoting over to fees. You’ve been investing a lot into these fee based businesses, and they’re they’re not in underserved areas. I mean, many of your peers are are are also targeting some of those areas. What gives Huntington the competitive advantage to to win here?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Yeah. You know, so we have made significant investments into our payments, our wealth management, our capital markets business. And in some cases, the the products are in fact differentiated. But but in large part, you know, many of our competitors have similar products to us. And so the the real success factor in right to win is not so much product differentiation per se.

It really comes down to two things. On one hand, it’s about execution and really having exceptionally good management of the channels, management of of introducing these products to to our customers in an effective way and then delivering on it. But even more importantly, it’s the fact that we are going after primary bank relationships where we have a deep legacy, and reputation for trust, for service, and we can, you know, really be in a position where our customers want to hear about these products and services from us. They they really they they genuinely desire to expand their relationship and and to create that full service banking, you know, connectivity with us. A great example of that is our merchant acquiring business.

We, as you know, we brought in house our merchant acquiring business in the fourth quarter of last year. The product that we are going to market with is identical to the prior model. Historically, we had outsourced and we had referred customers to to a partner. Now we’ve insourced, and the underlying technology and product is exactly the same. What’s different is the sales and service and relationship of Huntington.

And what’s the output? Sales pipeline has doubled. Sales outcomes have doubled. We expect to see a doubling of revenue this year versus last year and a quadrupling of revenue in the near term. You know, that’s really the kind of a proof point around that that differentiation of execution and and trust.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And and that’s not just fees. Right? Isn’t that deposits as well? It certainly drives a

Zach Wasserman, Chief Financial Officer, Huntington Bank: full banking. I mean, we really are embedding merchant acquiring into the core banking suite. And so there’s a there’s a lot of synergy for a customer to not only be have our merchant acquiring service, but also have our depository and treasury management capabilities, and often then that translates into lending activities as well.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: So let’s talk a little bit about credit. Given that there are still some uncertainties ahead, you know, know you you you reiterated the the NCO guide, but how do you think about the broader dynamics in the credit side over time?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Yeah. Look. I I think in in in, as always to credit, we’re really not seeing any substantive change in in the trends that we’ve seen for for the last number of quarters, expecting to see significant stability. I’ve I gave guidance around charge offs for the first quarter, and my expectation for the balance of the year is around that level also. You know, not seeing any signs of stress in terms of early stage delinquencies really in any area.

And I think it kind of some degree comes back to what I was saying before, our customers are in a solid position. We we’ve, over decades now, had rigorous client selection and underwriting that has really created a purposely diversified and really strong portfolio, and the degree of portfolio management and proactive action is very significant. So feel great about how that’s trending. And and, of course, also feel good about the very solid credit reserve we hold, 1.87, percent as of the first quarter. You know, it was a terrific amount of of, of coverage for us, as well.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: And the the other side of risk is is also rate and funding risk in addition to credit risk. The the the whole industry went through a lot in in March of twenty twenty three. Can you talk about how your framework has evolved since then and how you’re positioned relative to other regional banks?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Sure. You know, one of the things we talked a fair amount about during 2023 and it’s early twenty twenty four was that a portion, a subset of the investments we were making in the business was going towards foundational capabilities around process automation, data, and other capabilities to really continue to evolve the risk management framework from being more people dependent to being more process and automation focused. And I think, you know, that if you if you if you think back, I mean, what was the biggest lesson learned from one of what was one of the biggest lessons learned from the events of March of twenty twenty three? It was the speed with which the whole, situation unfolded. And so that ability to have push button knowledge of of internal cash flows, of deposit behaviors, and and amongst many other elements around the risk framework is, you know, is really important.

And so there’s been a significant amount of investment into that. Certainly, also operational risk and other kind of critical techno technological risk capabilities have been significantly invested in over that period of time as well. And it leaves us in a position now where we can just continue to drive this outsized growth, peer leading growth, while also being a 100% confident in the risk management framework. I I would remind that the management and board of the company is a top 10 shareholder of Huntington. So our our incentives are aligned to have a low volatility business model, one that is extraordinarily strong for a risk management framework across all the disciplines, capital, liquidity, credit, operational, technology risk, everyone.

We’ve we’ve made, that much stronger over the last several years.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Alright. Perfect. And, Zach, maybe to wrap up, on Friday, Michelle Bowman put out her list of priorities as as the new vice chair for supervision. You know, I think we’ve over the last year, we’ve in in the investor community, we’ve we’ve discussed a lot about what new rules and regulations can can come through for Cat four banks. Michelle Bowman did speak about tailoring being one of our priorities.

Can you talk a little bit about, you know, what rules and regulations do you see as most impactful for Huntington?

Zach Wasserman, Chief Financial Officer, Huntington Bank: Well, look, I I don’t know that I’ll comment on any particular, you know, regulatory matters. We’re we’re we’re encouraged by the progress of getting the the heads of the regulatory agencies confirmed. That’ll be important step to just get, you know, more and more progress toward that environment. I will say that that the idea of tailoring to us is very smart. You know, the the complexity and and scope of our business model is is just much different than than banks that are larger.

And I think the the regulator regulatory regime that is cognizant of that and calibrated to that is is something that that that that we believe is is is very prudent. So encouraged by those comments, and look forward to to working with, with all of our regulators.

Manon, Morgan Stanley Sales Representative, Morgan Stanley: Alright. Perfect. With that, we’re out of time. Zach, thanks so much for joining us. It’s a

Zach Wasserman, Chief Financial Officer, Huntington Bank: pleasure, Manon. Thanks for having us.

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