A Big Upgrade for Huntington Bancshares

Huntington Bancshares (Nasdaq: HBAN  ) has shown no better than a meager two-star CAPS rank over the past few years, but the financial firm has impressed enough top-performing members of our 160,000-strong Motley Fool CAPS community lately to break through to three stars. A total of 594 members have given their opinion on the diversified banking firm, with many of them offering analysis and commentary explaining the recent optimism.

While many regional banks still carry significant risks, signs of stabilization and improvement in the economy have convinced at least a few more CAPS members that things may be looking up for Huntington Bancshares. The company recently reported its first quarterly profit since 2008, with a 17% jump in net interest income, and it was able to reduce its provision for loan losses.

Stock in regional bank peers such as Fifth Third (Nasdaq: FITB  ) , KeyCorp (NYSE: KEY  ) , and Marshall & Ilsley (NYSE: MI  ) have joined Huntington Bancshares in booking some strong gains so far this year. All have reported improving credit trends in their recent quarterly reports and as such the banks are reducing provisions for bad assets. The trend has also been improving with big banks like JPMorgan Chase (NYSE: JPM  ) , which beat earnings expectations and reported 30% lower provisions for credit losses for all its loans.

Huntington Bancshares, SunTrust (NYSE: STI  ) , and Zions (Nasdaq: ZION  ) are among a number of regional banks that have yet to repay TARP money to the federal government. Unlike some of the larger banks that rushed to repay their obligations, Huntington says it doesn't feel pressured for immediate repayment.

While SunTrust and Zions ended up in the red in the first quarter, Huntington turned a profit and forecasts a profitable 2010, and management expects its positive momentum to continue to separate it from its peers over coming quarters. Its outlook for 2010 includes growing core deposits and a decreasing allowance for credit losses, and some investors think the bank has finally turned the quarter with a good opportunity for solid returns ahead.

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