Huntington Bancshares (HBAN): Flying Under the Bank Radar?
By:NewsyStocks   Thursday, February 02, 2022 1:38 PM

Huntington Bancshares (HBAN) is a $5 billion regional bank holding company that operates primarily through the Southeast and Midwest. The bank released earnings a couple of weeks ago and missed the vaunted "analyst estimates" for the fourth quarter. The reaction was as expected; an already undervalued stock became even more so. When we take a closer look at the numbers HBAN appears to have been oversold. The selling was almost certainly due to overreactions from those who didn't take the time or have the inclination to dig a little deeper than the headlines.

According to analysts HBAN should have generated $653 million in revenue for Q4. Turns out they missed by earning $644.4 million in revenue instead, a hardly precipitous 1.3% drop quarter-over-quarter.  The reason for the decline was primarily a lack of non-interest income; which shouldn't be surprising with the regulatory changes of 2011. But management, to their discredit, were not able to find other sources of revenue to make up the gap and fell a bit short.

As a result, Q4 year-over-year profit also disappointed coming in at $126.9 million. And based on the stock's movement these past couple of weeks the annual earnings of $542+ million was also bad news.

Those are the facts and there's no denying them. However, investors that are open to taking a longer term perspective may be surprised to learn how the bank holding company performed year-over-year. The $542 million in annual net income equates to an increase of over 73% from 2010's. Those returns represent phenomenal growth during what was undoubtedly a difficult time for banks.

As a firm believer in generating sustainable revenue from core banking lines, HBAN's loan loss provision was absolutely outstanding. The bank was able to nearly cut the provision in half, from $87 million to just over $45 million. In other words management is moving toward a quality, long-term loan portfolio of retail and commercial loans and that's exactly how it should be. Those are the type of portfolios the bank can rely on to generate that seemingly forgotten source of revenue; interest income.

Compared to similar sized regional banks the current stock price is ridiculously cheap too. HBAN is currently trading at just 9.76 times earnings, and this after a year of bumping shareholder profits over 70% from 2010.   The bank's 2.65% dividend isn't the highest in the industry, but in today's environment it's nothing to sneeze at either. And when you take into account the upside Huntington Bancshares offers mid-term investors, there's a real opportunity here.