The paragraph introduces the Huntington Bancshares 2024 Third Quarter Earnings Review call. Tim Sedabres, the Director of Investor Relations, welcomes participants and states that the call is recorded, with slides and replay available on their website. Presenters include Steve Steinour (Chairman, President, and CEO) and Zach Wasserman (CFO), with Brendan Lawlor (Chief Credit Officer) joining the Q&A session. Steve Steinour expresses gratitude for the dedication of the bank's employees and reports outstanding third-quarter results, emphasizing the bank's strength and consistent performance in 2024. He highlights a focus on accelerated loan and deposit growth.

The paragraph highlights the company's strong performance supported by their core businesses and new initiatives, such as expanding into new geographies and commercial banking verticals. It outlines their strategic actions during a declining Fed rate cycle, including balance sheet management and pursuit of record net interest income by 2025. The company also achieved higher fee revenues in payments, wealth management, and capital markets, alongside stable credit performance. The quarter's results set a foundation for future growth and profitability, with accelerated loan and deposit growth, improved capital ratios, and increased customer relationships, driving overall robust financial momentum.

The company has consistently achieved year-over-year growth in PBR for over 12 quarters by investing in organic growth, expanding its franchise and branches into the Carolinas, and enhancing its commercial and regional banking operations. Hiring local experts has led to better-than-expected results. Significant investments have been made in payments, particularly treasury management, with a successful commercial launch of the merchant acquiring business, which is projected to boost fee revenue growth by 1 percentage point. Credit trends remain strong due to disciplined client selection, with stable consumer delinquency rates and sound fundamentals from commercial customers. The company ended the third quarter with strong production levels, carrying momentum into the fourth quarter, exemplified by record loan production from the Regional Banking group.

The paragraph discusses the financial performance of Huntington in the third quarter. Late-stage commercial pipelines increased by 68% compared to the previous year, and the company is implementing beta action plans while maintaining disciplined expense management and investments. The company reported a robust fee revenue growth and has confidence in its organic growth outlook, capital markets, and advisory revenues. Huntington boasts stable credit, with consistent charge-offs and improved non-performing assets. Zach Wasserman, in his report, highlights that earnings per share were $0.33, with an ROTCE of 16.2%, or 16.3% adjusted for notable items. Pre-provision net revenue grew by 8.3%, driven by increases in net interest income and fee revenues. Average loan balances and deposits increased by 3.1% and 5.6% year-over-year, respectively, while credit quality remained strong with net charge-offs at 30 basis points and a slight decrease in allowance for credit losses.

The paragraph reports on a financial quarter where the company's adjusted Common Equity Tier 1 (CET1) ratio increased to 8.9%, up 30 basis points, supported by earnings and the recovery of accumulated other comprehensive income due to lower rates. Tangible book value per share grew by 21.5% year-over-year. The company's loan growth accelerated, with an overall 3.1% increase year-over-year in Q3, compared to 1.7% in Q2 and 1.3% in Q1. Excluding commercial real estate runoff, loans increased by $1.6 billion or 1.3%. End-of-period loans grew by 1.6%, annualizing to a 6.3% growth rate, driven by core business contributions and new initiatives, which accounted for $700 million in growth. Notable contributors to loan growth included consumer auto, regional banking, and various other segments, although there was a $747 million seasonal decline in distribution finance. Inventories are expected to rise in Q4, leading to higher balances.

The paragraph discusses the company's strong deposit growth in the third quarter, with average deposits increasing by $2.9 billion or 1.9%. Despite a small rise in total deposit costs, interest-bearing deposit costs remained flat, and there were declines in deposit costs in August and September. This was due to proactive management in anticipation of a federal rate cut. The company is well-positioned to optimize rates, projecting further rate cuts by 2025 and 2026, with a strategic focus on balancing deposit volumes and interest rates. Cumulative deposit growth since early 2023 has been 7.1%, outperforming peers, which has allowed the company to fund loan growth effectively while lowering the loan-to-deposit ratio.

In the third quarter, net interest income rose by $39 million to $1.364 billion, with a net interest margin of 2.98%, slightly down by 1 basis point from Q2. This was influenced by lower spreads, higher cash balances, and improved hedging. The full-year net interest income is expected to align with guidance, with flat to 1% growth in Q4 year-over-year and significant growth projected for 2025. Loan yields increased by 4 basis points despite a drop in SOFR, and the company is preparing for various economic and interest rate scenarios, including potential rate cuts. The firm's cash and securities increased due to deposit growth, with plans to maintain them at 28% of total average assets and reinvest in treasuries while managing the portfolio's unhedged duration.

The paragraph outlines a strategic adjustment in securities purchases, extending the duration to reduce asset sensitivity as market expectations shift towards lower interest rates. The company has already reduced asset sensitivity significantly and plans further reductions by mid-2025. This approach aims to protect capital and stabilize net interest margin (NIM). The paragraph also highlights a $32 million increase in GAAP non-interest income in Q3, with fee revenues rising by 12% on a core basis, driven by enhanced usage of fee services in payments, wealth management, and capital markets, increasing adjusted fee revenues from 25% to 28% of total revenues compared to the previous year.

In the third quarter, payments revenue increased by $4 million, with a year-over-year growth of $6 million. Commercial payments, including treasury management fees, grew by 8%, while debit card revenue rose by 3%, outperforming industry averages despite sluggish consumer spending. Other card-based revenues grew as well, supported by consumer credit spending. The company plans to enhance payments revenue growth with the addition of in-house merchant acquiring capabilities, projecting a 1% fee revenue growth in the next year. Wealth management showed a remarkable 18% growth, with a 7% increase in advisory relationships and a 22% rise in assets under management due to positive net asset flows. Capital markets revenue saw a substantial 50% increase, boosted by commercial banking-related activities and higher loan production. This momentum is expected to continue in Q4 and into 2025. Meanwhile, GAAP non-interest and core expenses increased by $13 million.

During the quarter, the company incurred $13 million in efficiency program expenses, expected to benefit the 2025 expense outlook by allowing reinvestment into revenue initiatives, partially offset by a $7 million FDIC special assessment benefit, resulting in notable items totaling $6 million. Core expenses were slightly better than expected at $1.124 billion, with an increase due to higher personnel expenses and $3 million in expenses from bringing merchant acquiring in-house. The company forecasts a 4.5% core expense growth for the year. Common equity Tier-1 capital ended at 10.4%, and adjusted CET1 ratio grew to 8.9%, with a goal to reach 9%-10%. Credit quality performed well, with stable net charge-offs at 30 basis points, a slight decline in the allowance for credit losses to 1.93%, a 9% decrease in the criticized asset ratio, and a 1 basis point decline in the non-performing asset ratio. The full-year outlook remains unchanged.

In the fourth quarter, the company expects to see loan and deposit growth both increase by 4% to 5% year-over-year. Net interest income for the full year is projected to be in line with previous guidance, with the fourth quarter remaining flat or increasing by 1% year-over-year. This growth is anticipated to pick back up in the first half of 2025, accelerating in the second half. Core fee revenues, adjusted for specific financial items, are expected to increase by 8% to 9% year-over-year in the fourth quarter. Core expenses are controlled and aligned with annual expectations, forecasted to grow by approximately 3% year-over-year, factoring in revenue-driven compensation levels and costs associated with insourcing the merchant acquiring business, offset by fee revenues. Credit performance is stable, with net charge-offs similar to the third quarter. The estimated tax rate for the fourth quarter ranges from 18% to 19%. Following the remarks, the session moved to Q&A with Tim Sedabres and the operator facilitating questions, starting with Manan Gosalia from Morgan Stanley.

In the paragraph, Zach Wasserman discusses the expectations for net interest income (NII) in the fourth quarter, indicating it will likely be flat or slightly down compared to the third quarter due to timing differences between falling floating rate asset yields and decreasing deposit costs. Despite the strong deposit growth outpacing loans, Wasserman explains there are plans to manage costs by reducing higher-cost CDs and decelerating deposit growth while loan growth accelerates, leveraging their strong deposit gathering throughout the year to optimize the loan-to-deposit ratio.

The paragraph discusses expectations for net interest income (NII) and net interest margin (NIM) for the fourth quarter and into 2025. Zach Wasserman clarifies that the NIM is expected to be slightly lower in the fourth quarter due to timing impacts before increased betas offset the effects on variable loans. He highlights the benefit of their hedging program, which reduced the NIM by 12 basis points in the third quarter. The discussion also addresses sensitivity to potential interest rate cuts by the Federal Reserve and their impact on the NII outlook.

The paragraph discusses the expectation of a sustained net interest margin (NIM) expansion throughout 2025, driven by accelerated beta, reduced hedge drag transitioning to a hedge benefit, and robust loan growth. It mentions how these factors are anticipated to lead to record net interest income (NII) in 2025. Additionally, it highlights the influence of potential interest rate cuts, noting that fewer cuts could improve short-term NIM and NII performance. However, the long-term impact remains uncertain, depending on the reasons for any deviation from the expected rate changes. Moreover, earlier rate reduction expectations in the market were beneficial for actions related to down beta.

The paragraph discusses trends in deposit and loan growth, particularly highlighting strong consumer deposit performance and a recent acceleration in commercial deposits. This growth is attributed to the company's core commercial business and new market entries, specifically mentioning success in the mortgage service vertical. Looking ahead to 2025, there's an expectation of continued deposit growth, with a slight shift toward more commercial deposits compared to consumer ones. The conversation ends with another participant inquiring about further clarifications.

The conversation involves Jon Arfstrom asking Zach Wasserman about projected Net Interest Income (NII) for the fourth quarter and beyond. Zach confirms a slight decrease from the previous quarter but anticipates a year-over-year increase of up to 1%. He expects steady NII growth through the quarters, with potential expansion in the Net Interest Margin (NIM) throughout the year. Regarding merchant acquiring, Zach clarifies that their current run rate is around $25 million annually, not the $200 million Jon was inquiring about.

The paragraph is a discussion during a conference call involving analysts and executives about financial projections. Erika Najarian from UBS asks Zach Wasserman about expectations for year-over-year growth in the fourth quarter of 2025, noting a consensus estimate of 8% growth compared to the implied fourth quarter of 2024, factoring in loan growth and net interest margin (NIM) dynamics. Zach Wasserman responds that he cannot provide precise guidance at this point but does not think the estimate is incorrect. He anticipates NIMs to rise above 3% in the second half of 2025, leading to notable expansion compared to the current year's forecast. Additionally, he mentions that the current loan growth rate is around 6% annualized, with expectations to maintain this pace into the next year.

The paragraph discusses Huntington's strong loan growth in the fourth quarter and its focus on maintaining a sustainable expense run rate. Erika Najarian acknowledges the company's investments leading to a projected 3% year-over-year expense growth, contrasting with past higher rates. Zach Wasserman emphasizes Huntington's dedication to efficiency and managing expenses while continuing to invest in technology and revenue-generating initiatives. The plan for 2025 is to achieve positive operating leverage with solid revenue growth, rather than shifting to a "harvest" mode.

The paragraph features a conversation about financial performance and future expectations. Zach Wasserman is responding to Matt O'Connor's question regarding better-than-expected fee revenues, particularly in capital markets, which surpassed their expectations for Q3. Wasserman highlights a 12% year-over-year growth in fees and anticipates strong sequential growth in capital markets for Q4. He also mentions ongoing efforts in household acquisition, net flows, and payments, with merchant acquiring providing additional growth. Later, O'Connor asks about credit risk transfers (CRTs) and whether the company plans to reduce or unwind them now that they are nearing their targeted capital levels.

The paragraph discusses a company's strategy for capital growth and its approach to auto business and credit trends. The company focuses on core organic earnings and a strong return on capital as the primary drivers for capital growth, while also considering CRT transactions as opportunistic innovations in the market. These transactions are seen as efficient but secondary to core earnings. The company reports increased production in the auto sector in the third quarter and views this as a favorable asset class, especially with expectations of lowering interest rates. Additionally, the paragraph touches on credit trends, noting an update from an auto peer and a slight increase in credit in the third quarter, suggesting a focus on managing credit trends amid changing auto values.

The paragraph discusses a strong financial performance in a business focused on prime and super-prime credit quality. It highlights the efficiency of the business, with a 10% efficiency ratio, and its ability to quickly adjust pricing for optimized returns. Production levels for the fourth quarter are expected to remain consistent with the third quarter, suggesting a stable run rate. Brendan Lawlor provides insight into the company's credit management, emphasizing the use of a custom scorecard for customer selection, resulting in stable delinquency and charge-off rates that are lower than industry peers. Steve Steinour underscores the company's disciplined approach and confidence in their model, with a proven track record over 15 years, ensuring resilience against industry downturns.

The paragraph is a discussion between Sean and Zach Wasserman regarding adjustments in hedge programs, specifically focusing on asset sensitivity management. Zach explains that they are working to reduce asset sensitivity significantly, aiming for a 50% reduction by the end of the year and 60% by mid-next year. They actively adjust their strategies to protect capital and stabilize Net Interest Margin (NIM). Recently, they executed $1 billion of forward-starting receivers to decrease asset sensitivity for the latter half of 2025. The strategy involves allowing pay fix swaptions to expire, adding more forward-starting receivers when the market is favorable, lengthening the duration of U.S. Treasury securities, optimizing the funding mix towards more variable funding, and reducing Fed cash levels. Sean acknowledges the response, and the operator indicates the end of the Q&A session.

Steve Steinour provided closing remarks at a conference, highlighting the company's strong performance in the third quarter, driven by organic growth strategies. Key achievements included an increase in net interest income, growth in fee revenues, well-managed expenses, and stable credit conditions. He emphasized the company's competitive position, strategic investments, and alignment with shareholder interests. Steinour also mentioned an upcoming Investor Day on February 6 and expressed gratitude to Huntington colleagues. The call concluded with the operator thanking participants.

This summary was generated with AI and may contain some inaccuracies.