Huntington Bancshares Fails to Wow Investors (HBAN)

When it comes to the earnings season, traders often react more to what is said or not said than the headline numbers. Sometimes trader satisfaction relies on something other than a “beat” of analysts’ prognostications. Huntington Bancshares (NASDAQ: HBAN) released third quarter earnings and forward-looking statements that seemed less than inspiring to investors and traders. The Columbus, Ohio-based bank reported quarterly earnings of $0.19 per share compared to the consensus view of analysts that expected $0.17 per share. Sequentially from the second quarter, the bank showed a 10% increase in earnings that resulted primarily from a deferred tax valuation benefit.

On the lending front, Stephen Steinour, CEO of Huntington Bancshares, said the bank had decided to slow down its mortgage lending business for now until the ramifications of the Federal Reserve’s proposed implementation of Basel III capital standards policy becomes clearer. According to Steinour, the new policy changes the weighting and capital requirements for loans made in prior periods. The bank will see an increase of $4.5 million in expenses related to the Federal Reserve’s stress test. Average loans and leases increased 2% from the same period in the previous year, but they showed a drop of 3% from the quarter before.

Non-interest bearing checking account deposits, a primary focus of the bank, increased by 44% year over year. Steinour said checking account households and commercial relationships engage in four or more products or services offered by the bank.

Huntington Bancshares declared a quarterly $0.04 dividend on its common stock payable on January 2, 2013, to holders of record on December 18. At the closing price today, the dividends over the year give the stock an effective yield of 2.42%.

Traders and investors appeared to yawn at the news as the stock opened a few pennies below yesterday’s closing price. Shortly after the opening bell, share prices tacked on two cents and hit the high for the day at $6.99. From that point on, share prices spent the rest of the day sledding downhill. The stock fell as low as $6.53 before bouncing in the final hour. Huntington Bancshares stock finished the trading session with a loss of 6% to close down 44 cents at $6.61. The volume on the day, 40.6 million shares, exceeded the number of shares traded on an average day by four-fold.

Since the beginning of the year, shares prices have appreciated by 32%. Right before the ringing of the New Year, the stock touched its 12-month low when shares traded for $4.66. For the last nine and a half months, share prices of the Ohio bank climbed in fits and starts to a 52-week high of $7.25 that was established on October 5. One question investors will be thinking about is whether today’s action was merely a bump in the road or a cautionary sign of approaching potholes.

Twenty-six analysts cover the stock with an average rating of “hold”. The consensus view of analysts has a price target of $7.18.

Huntington Bancshares provides a host of financial services that include commercial, small business and consumer banking; investment products and brokerage services; as well as insurance products and trust services. As of July 2012, the bank operated 680 branches scattered among Ohio and the five surrounding states. The bank is headquartered in Columbus, Ohio, and was founded in 1866.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).