On Thursday, UBS made adjustments to its financial outlook for Huntington Bancshares (NASDAQ:HBAN), reducing the price target to $15 from the previous $16 while still recommending the stock as a Buy. This decision comes in light of recent economic developments and their impact on rate assumptions.
The firm's analysis suggests that the market has now factored in a potential rate cut by the Federal Reserve in December, a move that aligns with Huntington Bancshares' updated guidance. Consequently, UBS has revised its 2024 earnings estimate for the company downward by 2%, resulting in a new forecast of $1.13 per share. This estimate accounts for an expected 4% decrease in net interest income (NII) on an underlying basis.
Looking further ahead, UBS has also adjusted its 2025 earnings projection, decreasing it by 7% to $1.30 per share. This reflects an anticipation of four 25 basis point rate cuts in 2025, coupled with a projected 5% year-over-year growth in NII. According to UBS, this revised outlook is consistent with Huntington Bancshares' recent performance relative to the Bank Index (BKX), which has seen the company's shares underperform by approximately 1%.
The new price target of $15 is based on a target price-to-earnings (P/E) multiple of 12 times and a tangible book value (TBV) multiple of 1.7 times. These multiples are applied to the bank's financial metrics to arrive at the adjusted valuation. Despite the reduction in the price target, UBS's Buy rating indicates a continued positive outlook on Huntington Bancshares' shares.
In other recent news, Huntington Bancshares has seen several significant developments. The company provided an updated investor deck revealing a lower forecast for full-year net interest income and specified narrower growth ranges for average loans and deposits. RBC Capital maintained its Outperform rating on Huntington Bancshares, aligning its estimates with the bank's revised projections. Huntington Bancshares also announced its decision to internalize its merchant acquiring business, a move expected to generate incremental revenue synergies and enhance profitability.
Simultaneously, Stephens maintained an Equal Weight rating for Huntington Bancshares, following the bank's revised 2024 loan growth forecast and increased deposit cost outlook. The bank also plans to launch two new deposit verticals in 2024, each projected to yield $5 billion in deposits over the medium term.
JPMorgan (NYSE:JPM) reaffirmed its Overweight rating for Huntington Bancshares, buoyed by the bank's strategic growth initiatives. These include the addition of new service verticals and expansion into new markets, which are expected to bolster loan growth in the second half of 2024.
In a significant leadership change, Huntington Bancshares announced the appointment of Angie Klett as President of Huntington Insurance, Inc., following the retirement of Mary Beth Sullivan. Klett's role will be to expand Huntington's insurance division, leveraging her extensive experience in corporate development at Nationwide Insurance.
InvestingPro Insights
In the wake of UBS's revised financial outlook for Huntington Bancshares (NASDAQ:HBAN), real-time data from InvestingPro provides additional context for investors. The bank's market capitalization stands at a robust $17.77 billion USD, and it currently boasts a price-to-earnings (P/E) ratio of 10.93, reflecting investor sentiment on its earnings potential. Furthermore, Huntington Bancshares' dividend yield is notably high at 4.98%, showcasing its commitment to returning value to shareholders, having maintained dividend payments for 54 consecutive years.
InvestingPro Tips highlight that despite the stock being in oversold territory according to the RSI, analysts predict profitability for the company this year, with a track record of profitability over the last twelve months. This could signal potential for a rebound, especially when considering the bank's solid operating income margin of 36.92% in the last twelve months as of Q1 2024. For investors seeking deeper analysis, InvestingPro offers additional tips on Huntington Bancshares, which can be unlocked with the exclusive coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With this, users can access a comprehensive suite of tools and insights to inform their investment decisions.
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