Banks and Huntington Bank and Regional/National Banks and Banking & Finance and TARP

Huntington Bancshares reports first profit since 2008

April 21, 2010

Huntington Bancshares Inc., Ohio’s third-largest bank and a major banking player in Indiana, posted its first quarterly profit since 2008 and said it would be profitable for 2010 as an improving economy helps credit trends.

First-quarter net income of $39.7 million, or 1 cent a share, compared with a loss of $2.43 billion, or $6.79, in the same period a year earlier, Columbus-based Huntington said Tuesday in a prepared statement. The result included a net tax benefit of $38.2 million. The average estimate of 15 analysts surveyed by Bloomberg was for a loss of 15 cents a share.

Huntington National Bank, a subsidiary of Huntington Bancshares, operates nearly 50 branches and has about 600 employees in the Indianapolis area.

CEO Stephen Steinour has said 2009 probably marked the peak for credit losses and he is focusing on reducing bad loans this year. The bank had five quarterly deficits before the first quarter and a $3.1 billion annual loss for 2009. Steinour became Huntington’s chief in January 2009 after the bank took $1.4 billion from the federal Troubled Asset Relief Program.

Huntington projects it will be profitable for the year without providing a specific outlook. Analysts had estimated the bank would turn profitable in the fourth quarter of 2010 with full-year profit in 2011.

“All our indicators are moving forward positively, our credit indicators are moving forward nicely, our revenue is increasing and our net interest margin is expanding,” Steinour said. “We’re seeing significant reductions in non-performing assets and past-due loans.”

Steinour said Huntington will need to be more confident about the economic recovery and show sustained profitability before it repays TARP.

“The expectation of more meaningful profitability in FY11 will continue to drive shares higher over the next year,” FBR Capital Markets Corp. analysts David Rochester and Michael Tarkan wrote in a report before earnings were released. “The company has the capital, strategy, and the management team in place to achieve strong earnings power.” FBR rates the stock “outperform.”

Net interest margin, the difference between what a bank pays on deposits and charges for loans, widened to 3.47 percent from 2.97 percent. The lender set aside $235 million in the first quarter to cover bad debts, decreasing from $292 million in the same period a year earlier. Debt Huntington doesn’t expect to be repaid fell to $239 million from $342 million in the first quarter of 2009.

Huntington shares rose to $6.13 each from $5.83 in trading before the official open of Tuesday's market after gaining 6.2 percent in trading Monday. The shares have advanced 60 percent in the last 12 months.

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