Warren Buffett attracts a lot of attention. As the world's third-richest person and most celebrated investor, thousands try to glean what they can from his thinking processes and track his investments.

While we can't know for sure whether Buffett is about to buy Huntington Bancorp (Nasdaq: HBAN) -- he hasn't specifically mentioned anything about it to me -- we can discover whether it's the sort of stock that might interest him. Answering that question could also inform whether it's a stock that should interest us.

In his most recent 10-K, Buffett lays out the qualities he looks for in an investment. In addition to adequate size, proven management, and a reasonable valuation, he demands:

  1. Consistent earnings power.
  2. Good returns on equity with limited or no debt.
  3. Management in place.
  4. Simple, non-techno mumbo jumbo businesses.

Does Huntington Bancorp meet Buffett's standards?

1. Earnings power
Buffett is famous for betting on a sure thing. For that reason, he likes to see companies with demonstrated earnings stability.

Let's examine Huntington's earnings history:

Source: Capital IQ, a division of Standard & Poor's.

Like many banks, Huntington took major losses in 2009 but is starting to rebound.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt burden, because that will skew your calculations and make the company look much more efficient than it actually is.

Since competitive strength is a comparison between peers, and various industries have different levels of profitability and require different levels of debt, it helps to use an industry context.


Leverage Ratio

Return on Equity (LTM)

Return on Equity (5-year average)

Huntington Bancorp 9.8% 7.7% (5.4%)
Regions Financial (NYSE: RF) 9.4% (1.6%) (4.8%)
KeyCorp (NYSE: KEY) 11.6% 9% 1.6%
Fifth Third Bancorp (NYSE: FITB) 11.2% 8% 2.7%

Source: Capital IQ, a division of Standard & Poor's.

Huntington exhibits slightly lower returns on equity than these peers, though the company also has a relatively low leverage ratio.

3. Management
CEO Stephen Steinour has only been at the job since 2009, but he's been in the industry for a couple of decades.

4. Business
At its most complex, finance can resemble some combination of brain surgery and rocket science. With the exception of his sweetened Goldman Sachs deal, Buffett tends to favor simpler national banks like Wells Fargo (NYSE: WFC) and US Bancorp (NYSE: USB). Huntington may not be as complicated as some of the crazier national banks, but it did get in over its head during the mortgage boom.

The Foolish conclusion
Regardless of whether Buffett would ever buy Huntington Bancorp, we've learned that the company exhibits moderate debt levels, but few of the other characteristics of a quintessential Buffett investment. Buffett might like to see a bit more of how the turnaround at Huntington plays out.

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