1 Critical Takeaway from Huntington Bancshares Incorporated Earnings

At first glance the earnings at Huntington Bancshares Incorporated weren't what many had hoped for, but when compared to Fifth Third Bank and KeyCorp, there is one critical reason why.

Feb 11, 2014 at 5:30PM

With the dust settled on earnings seasons, there is one major takeaway from Huntington Bancshares (NASDAQ:HBAN) every investor should take note of.

Hban

Banks like Huntington are in an interesting place. At last count, it was the 37th largest bank in the US by assets, meaning it often has to be selective about its growth opportunities, and doesn't operate on nearly the same scale and magnitude of some of its principal competitors.

But when you consider almost 80% of its deposits are held in Ohio and Michigan, there is no denying Huntington is a regional bank in the truest sense of the word.

And while banks everywhere were reporting a dramatically better year in 2013 compared to 2012, that unfortunately wasn't the case for Huntington, as it actually saw a decline in net income on the year.

First glance may be deceiving
"We are pleased with our year-end results, which demonstrate again that our strategies are working," said Huntington Bancshares CEO Stephen D. Steinour, of the results in the fourth quarter. "Huntington's performance in the second half of 2013 demonstrates strong business momentum, positioning us well for 2014."

But a quick glance at the bottom line of income growth at Huntington certainly leaves something to be desired when compared to other Ohio-based peers KeyCorp (NYSE:KEY) and Fifth Third Bank (NASDAQ:FITB):

Bank

2012

2013

Difference

Huntington

 $641

 $639

-0.4%

KeyCorp

 $836

 $887

6.1%

Fifth Third Bank

 $1,541

 $1,799

16.7%

Source: Company Investor Relations

Yet buried at the bottom of its earnings release Huntington shows the biggest reason for its drop in income resulted from its mortgage banking operations, where income plummeted by 34%, or nearly $64 million in 2013:

Images
Source: Company Investor Relations

Compare that to KeyCorp where the percentage drop was larger (52.5%), but the $40 million to $19 million drop could largely be classified as inconsequential relative to its $1.8 billion in noninterest income. And while mortgage banking also dipped at Fifth Third, from $845 million to $700 million, the decline of 17% was less dramatic.

What to make of it all
The reality is, as a result of the refinancing boom that swept the country in 2012, Huntington was a major beneficiary. This translated directly to the bottom line income of the company, and was one of the key reasons its total net income rose 18% from $543 million to $641 million in 2011 to 2012.

Yet at the same time, the exact opposite happened in 2013, and the fall in net income was almost entirely attributable to shrinking mortgage banking income as shown in the chart below:

 201120122013
Net interest income after provision for credit losses $1,455 $1,563 $1,615
Total noninterest income (exc. mortgage banking) $897 $907 $871
    Total noninterest expense $1,729 $1,836 $1,758
Income before income taxes $624 $634 $728

Dollars in millions. Source: Company Investor Relations

The mortgage business is a significant part of Huntington, and its drop shouldn't be discounted, but the big decrease in earnings is more the result of a great 2012 than a poor 2013. 

The dividend is key
One of the dirty secrets few finance professionals will openly admit is the fact dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Patrick Morris has no position in any stocks mentioned. The Motley Fool owns shares of Fifth Third Bancorp, Huntington Bancshares, and KeyCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers