Huntington Bancshares (HBAN) Q1 FY26 earnings call: guidance and Q&A

Can you elaborate on the balance sheet optimization project, its goals, timeline, and how success is measured?

The optimization calibrates against a slightly softer economic outlook, leading to forecasting loan growth at the midpoint of the range. It involves tuning down commercial real estate, particularly construction, and ensuring core deposit growth matches or exceeds loan growth, while being judicious about managing NIM.

“what we're doing is a few things really primarily to calibrate against what we see as the economic environment, which continues to be supportive generally of the plan, but at the margin is a little softer in terms of economic growth outlook.”

asked by Jon Arfstrom · answered by Zachary Wasserman

Why a $3 billion buyback authorization, given the current $550 million plan, and what is the plan for its utilization?

The $3 billion authorization is an evergreen program for a multi-year period, replacing the prior one. It supports the $550 million plan for 2026 and $1.1-$1.2 billion for 2027. Basel III Endgame is expected to represent an additional share repurchase opportunity in 2027.

“I think what we're seeing now emerge in the industry as a best practice is to have an evergreen authorization that's extent for a period of time. So part of this is just ensuring that we can have a good functioning program over a multiple year time period.”

asked by Jon Arfstrom · answered by Zachary Wasserman

What are the incremental cost actions, and how is the company managing talent retention post-Cadence integration, especially given competitor claims of hiring Cadence producers?

Incremental cost actions involve accelerating efficiency programs (e.g., genetic process transformation) and rephasing less critical investments, resulting in a baseline tuning of about $50 million. Talent retention post-Cadence is strong, particularly for leadership, with the company focused on a strong colleague value proposition and providing enhanced capabilities. Some turnover is expected, partly due to differences in credit philosophy for certain businesses.

“The baseline kind of tuning action that we did for expenses was about $50 million. And generally, what we look at when we do those kind of things is twofold. One, can we accelerate our efficiency programs.”

asked by L. Erika Penala · answered by Zachary Wasserman

Could you provide more detail on the potential RWA deflation under Basel III Endgame and why the stock is underperforming despite strong results and positive outlook?

Basel III Endgame is constructive, with an estimated RWA reduction of 7.7% (7.5-8%) under the standardized approach, representing approximately 80 basis points of CET1 benefit. Management is frustrated by the stock's underperformance but focuses on delivering strong results, including 30% EPS growth and 200 bps ROTCE increase by 2027, believing the valuation will recover as these results become manifest.

“The RWA delta that we see at this point under a standardized approach is about 7.7% to be precise, so in the range of 7.5% to 8% reduction in RWA. That should represent approximately 80 basis points of reported CET1 benefit.”

asked by L. Erika Penala · answered by Zachary Wasserman

How have loan pricing and spreads impacted the NII outlook, and what drove the decision to increase cash at the Fed, as it wasn't in the prior plan?

Loan spreads are stable with modest compression (5-15 bps) for high-quality commercial borrowers in competitive markets, not significantly impacting the outlook. The decision to add $4 billion of incremental Fed cash was driven by geopolitical issues and a desire to further strengthen liquidity, ensuring a position of strength, despite having no material impact on actual NII dollars.

“The Middle East issues are what drove us to that decision.”

asked by John Pancari · answered by Stephen Steinour

Can you update your thoughts on potential incremental M&A interest, given current integrations and regulatory backdrop, and the size of any potential whole bank deals?

The company's stance on M&A hasn't changed; the primary focus remains on driving organic growth and successfully integrating current partnerships. While not ruling out future inorganic opportunities, there's no reason to change focus from the core. Any potential deal would likely not be large, as the focus is on growing organically to the 5% level.

“Our stance hasn't changed. We're consistent on this issue. The primary focus for us is driving organic growth.”

asked by John Pancari · answered by Stephen Steinour