Bloomberg News

Huntington Shares Fall as Margins Narrow More Than Forecast

October 20, 2011

(Updates share price in second paragraph.)

Oct. 20 (Bloomberg) -- Huntington Bancshares Inc. fell the most among the biggest U.S. banks in New York trading after reporting narrower profit margins and third-quarter earnings that relied on a one-time gain to match analysts’ estimates.

Huntington dropped 6.9 percent, the biggest decline in the 81-company Standard & Poor’s 500 Financials Index, to $4.88 on the Nasdaq Stock Market at 4 p.m., after shares of the Columbus, Ohio-based bank fell as much as 8 percent earlier today.

“The earnings quality may have been somewhat below market expectations,” Terry McEvoy, an analyst for Oppenheimer & Co. in Portland, Maine, said in an interview. The one-time gain, a lower tax rate and a narrower net interest margin are contributing to the decline in the shares, said McEvoy, who rates the stock “outperform.”

Huntington said a $15.5 million gain connected to the sale of an auto-loan securitization helped push net income to $143.4 million, or 16 cents a share, from $101 million, or 10 cents, in the same period a year earlier. Twenty-two analysts surveyed by Bloomberg estimated on average 16 cents per share.

Net interest income fell to $406 million in the third quarter from $410 million a year earlier. The net interest margin, the difference between what a bank pays in deposits and charges for loans, dropped to 3.34 percent from 3.40 percent in the second quarter, more that what the company expected, according to the statement.

Chief Executive Officer Stephen Steinour said the lender has “largely recovered” a $30 million loss from offering unconditional free checking accounts by adding new customers.

Household Growth

“It has accelerated our household growth -- today we grow every ten weeks, every twelve weeks, what we used to grow in our best year ever,” Steinour said today in a telephone interview. “There were a lot of questions about, were they walking the plank, being naïve, silly, stupid -- things like that. And we’re thrilled with our position.”

The lender is attempting to upend its biggest competitors, the U.S. banking lobby and the campaign to roll back new Federal Reserve rules and win customers with account features such as a 24-hour grace period for overdrafts as banks including Wells Fargo & Co. and Bank of America Corp. add fees or end free checking to replace lost revenue.

Consumer checking account households expanded at an 11 percent annualized rate during the first three quarters, up from 7 percent and 3 percent in 2010 and 2009, respectively, the company said.

--Editors: Steve Dickson, William Ahearn

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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