'We're hitting on all cylinders', says Huntington Bancshares CEO on earnings

Key Concepts:

• Net Interest Income (NII)
• Net Interest Margin (NIM)
• Loan Growth
• Deposit Growth & Pricing
• Charge-offs
• SBA Lending
• Reshoring
• Recession (Mild vs. Sharper)
• Unemployment Rates
• Consumer Delinquencies
• Transactional Activity

1. First Quarter Results and Outlook:

• Huntington Bancshares reported a 26% increase in first-quarter profit.
• Net interest income (NII) was up 11%.
• The company experienced strong loan and deposit growth.
• Huntington Bancshares boosted its net interest income forecast for the year.
• Net interest margin (NIM) expanded nicely during the first quarter and is expected to hold at roughly the current level, which is higher than the prior forecast.

2. Confidence in Forecast:

• Confidence stems from strong loan growth, favorable deposit pricing, strong fees, and charge-offs being below expectations.
• The company is "hitting on all cylinders."
• Customer interactions indicate a positive outlook for the second quarter.
• Some businesses are expected to take advantage of the current environment and perform better.

3. Types of Businesses Expected to Thrive:

• Smaller businesses that don't heavily engage in exporting or importing.
• Businesses not involved in "heavy metal bending activities" (industries significantly affected by steel or aluminum price fluctuations).
• The expectation is that fair trade agreements will benefit many manufacturing and larger businesses in the US.

4. Labor Market Dynamics:

• For 5-6 years, businesses have faced a chronic labor shortage.
• The market is adjusting to a new equilibrium.

5. Regional Expansion and Construction:

• Huntington Bancshares expanded into Texas and North and South Carolina last year.
• Construction business in South Carolina is booming with advisory board members reporting they have "never been busier."

6. Recession Concerns:

• While Huntington models various scenarios, including mild or sharper recessions, they don't see it as a necessary or likely outcome at this stage.
• Unemployment rates are still very low by historical standards.
• Interest rates are relatively attractive compared to historical levels.

7. Consumer Side:

• Deposit growth has been sequential for a number of years, with a very good first quarter.
• Deposit pricing was favorable on much of the deposit portfolio.
• The consumer market is bifurcated:
  • Lower to moderate-income consumers have felt pressure as rates have increased.
  • A large segment of the consumer population in the Midwest is doing well.
• There is a housing shortage in the Midwest, with more demand than supply.
• Auto sales had a very good month in March, possibly due to pre-buying.
• Consumer delinquencies are holding in very nicely.
• The consumer generally looks good, although there has been some reduced transactional activity.

8. Conclusion:

Huntington Bancshares is optimistic about its financial performance, driven by strong loan and deposit growth, favorable deposit pricing, and low charge-offs. While acknowledging potential economic challenges, the company does not foresee a recession as a likely outcome and sees strength in various sectors, particularly among smaller businesses and in regions like the Midwest and the Carolinas. The consumer market is mixed, with lower-income individuals feeling the pressure of rising rates, but overall, consumer delinquencies remain low.