The Hidden Reason for Optimism at Huntington Bancshares Incorporated

Huntington Bancshares lost ground to Regions Financial and KeyCorp, but a dive beneath the surface reveals a bright spot to be found.

Jun 16, 2014 at 6:59AM

Huntington Bancshares (NASDAQ:HBAN) couldn't keep up with peers Regions Financial (NYSE:RF) and KeyCorp (NYSE:KEY) in on essential measure. But first glance is deceiving, and a dive beneath the surface reveals there is reason for optimism with Huntington.


Trailing competitors
Regional banks like Huntington, Regions Financial, and KeyCorp are often much less complex than the "big four" banks that have trillions in assets. As a result, they're often easier to compare.

They make their money through net interest income, which is the difference between what they receive in interest from loans they issue versus what they pay out on deposits, bonds, and other forms of borrowing. And the rest comes through fees known as noninterest income.

Often the biggest banks have a roughly 50/50 split between net interest income and noninterest income, whereas the three banks mentioned above are much more dependent on the difference between what they take in, versus what they pay out:

Net Interest Income as a % of total Revenue

Huntington Bancshares


Regions Financial




Source: Company Investor Relations. 

As a result, it's important to see just how well these banks are doing at increasing revenue by issuing loans. While there are dangers from lending to those they shouldn't, seeing a growth in loans is encouraging.

But it isn't just mortgages and auto loans, as these banks are dependent on commercial loans -- those made to mid-sized companies -- with more than half (and nearly three quarters in the case of KeyCorp) of the total loans they issue being made to those businesses:

Commercial Loans as a % of total loans

Huntington Bancshares


Regions Financial




Source: Company Investor Relations.

With all that in mind, one of the troubling things about Huntington Bancshares is its loan growth in this critical business comes in at roughly half the rate of its peers:

Source: Company Investor Relations.

As a result it's easy to think Huntington is in trouble, but it is here where a dive beneath the numbers is critical, as there is reason for optimism.

The bright spot
One of the things Huntington has harped on over the last few years is its desire to build deeper relationships with its existing clients, known as its Optimal Customer Relationship, or OCR. This allows it to offer a full suite of products to customers extending beyond loans to money management through its treasury services as well as helping firms issue their own bonds and equity.

One of the encouraging things about Huntington is that it has done a remarkable job at developing deeper relationships with its customers, as shown in the chart below:

Source: Company Investor Relations. 

And these deeper relationships have resulted in huge increases in revenue, because while its total relationships have grown by just 2.5% over the last year, its revenue is up 12.5%, from $175 million to $197 million.

The Foolish bottom line
At times we are led to think the only way a bank can grow is through issuing more loans to more customers. But Huntington Bancshares is a powerful example of a bank that is seeking not simply to widen its base of clients, but instead have deeper relationships with them.

This strategy may not be typical, but it is succeeding, and this could continue to mean big things for both it and its shareholders in the years to come.

These stocks beat the big banks...
Looking to see the dividends rise at the banks like Huntington? Good news, we've found how you can pocket big dividends. The thing is, over time, dividends can make you significantly richer. And guess what? The big banks are laggards when it comes to paying dividends. So instead of waiting for a cash windfall that may never come, check out these stocks that are paying big dividends to their investors RIGHT NOW. Click here for the exclusive free report.

Patrick Morris has no position in any stocks mentioned. The Motley Fool owns shares of 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

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, 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