Executive Summary / Key Takeaways

• Huntington Bancshares is executing a deliberate counter-cyclical expansion strategy that delivered 9.2% loan growth and 11% net interest income growth in Q3 2025, positioning the bank to capture market share while competitors retrenched during recent banking sector stress.
• The bank stands at a clear NIM inflection point, with FTE net interest margin reaching 3.13% in Q3 and management guiding to at least 10 basis points of expansion in 2026, driven by fixed asset repricing and disciplined deposit cost management that has already achieved a 37% cumulative deposit beta.
• Two transformative acquisitions—Veritex (VBTX) (closed October 2025) and Cadence (CADE) (announced October 2025, expected Q1 2026)—establish Huntington as a dominant regional franchise in Texas and the Southeast, with combined additions of $66 billion in assets and $55 billion in deposits creating immediate scale and substantial revenue synergy opportunities.
• Credit quality remains pristine with net charge-offs at just 22 basis points and a moderate-to-low risk appetite that management has maintained throughout the expansion, providing crucial downside protection against macroeconomic uncertainty and commercial real estate headwinds.
• Trading at 11.6x earnings and 1.24x book value with a 3.75% dividend yield, Huntington offers an attractive risk/reward profile for investors seeking exposure to regional bank consolidation and margin recovery, though execution risks on dual integrations and competitive deposit pressures warrant close monitoring.

Setting the Scene: A 159-Year-Old Bank Reinventing Regional Banking

Huntington Bancshares, founded in 1866 as The Huntington National Bank and headquartered in Columbus, Ohio, has evolved from a traditional Midwest lender into a multi-state diversified regional bank with $210 billion in assets. The company generates revenue through two primary segments: Consumer Regional Banking, which serves individuals and small businesses through deposits, lending, and fee-based services; and Commercial Banking, which provides comprehensive financial solutions to commercial clients including capital markets, equipment financing, and treasury management. Net interest income drives roughly 70% of revenue, with the remainder from fees including payments, wealth management, and capital markets activities.

The regional banking industry faces structural headwinds from deposit competition, margin compression, and commercial real estate concerns. Yet Huntington has distinguished itself through a counter-cyclical strategy that accelerated during the 2023 banking crisis while peers retrenched. This approach—rooted in a long-standing aggregate moderate-to-low risk appetite—enabled the bank to invest in growth, acquire customers, and hire hundreds of bankers when others faced liquidity and capital constraints. The result is industry-leading deposit and fee revenue growth that has translated into tangible market share gains across Huntington's footprint.

Huntington's competitive positioning rests on a relationship-oriented model that prioritizes primary bank relationships over transactional volume. This strategy manifests in the bank's ability to win checking and operating accounts, which management describes as "foundational" to gathering efficient marginal funding. The approach has proven particularly effective in expansion markets like Texas and the Carolinas, where seasoned bankers with decades of local experience have accelerated profitability "well beyond what we thought was possible."

Technology, Products, and Strategic Differentiation

Huntington's technological differentiation emerges not from fintech disruption but from sophisticated integration of digital capabilities with deep relationship banking. The October 2025 launch of the Treasury Management Connectivity Ecosystem, an API-first platform delivering financial control and intelligent automation for business customers, represents a strategic response to the digitization of commercial banking. This enables Huntington to compete for commercial deposits and fee income against larger national players while maintaining the local relationships that drive deposit stickiness.

The bank's product strategy centers on specialized verticals that generate higher-margin fee income and deepen customer relationships. The Financial Institutions Group and Aerospace and Defense verticals, launched in Q1 2025, join a fully built-out leveraged finance and private equity platform that is expected to contribute more meaningfully going forward. The Funds Finance business has ramped faster than any other specialty vertical, while the commercial card portfolio achieved the second-highest growth rate in commercial card spend across the industry in 2024. These initiatives diversify revenue away from spread-based lending and create switching costs that protect against deposit attrition.

Huntington's "People-First, Customer-Centered" approach translates into tangible competitive advantages in deposit gathering. Management describes an "incredibly sophisticated approach" to managing deposit activities that is "underpinned by the fact that we have primary bank relationships." This relationship orientation helps the bank avoid problematic credits that have recently impacted competitors, as management noted they "tend to pass" on deals lacking full relationship potential. The strategy yields a 37% cumulative deposit beta that has outperformed peer levels since Q1 2023, directly supporting net interest margin expansion.

Financial Performance & Segment Dynamics

Huntington's Q3 2025 results provide compelling evidence that the counter-cyclical expansion strategy is delivering. Net income reached $629 million, or $0.41 per diluted share, up from $0.33 in the year-ago quarter. On an adjusted basis, EPS of $0.40 represented 18% year-over-year growth. Net interest income increased 11% to $1.50 billion, driven by a 15 basis point expansion in FTE net interest margin to 3.13% and a $10.8 billion increase in average earning assets. This performance demonstrates that Huntington can grow both volume and spread simultaneously—a rare combination in the current environment.

The segment breakdown reveals distinct growth drivers. Consumer Regional Banking generated $998 million in net income for the nine months ended September 30, 2025, with average loans growing 7% to $73.2 billion and average deposits increasing 1% to $111.4 billion. The segment's net interest margin of 3.56% compressed just 4 basis points year-over-year despite rate volatility. Commercial Banking delivered $893 million in net income, with average loans surging 10% to $59.9 billion and average deposits jumping 17% to $44.1 billion. The segment's net interest margin of 3.33% declined 35 basis points, but this was more than offset by a 14% increase in noninterest income and a $52 million decrease in provision for credit losses.

Loan growth acceleration to 9.2% year-over-year, with new initiatives accounting for 40% of Q3 growth, validates management's investment strategy. Geographic expansion in Texas and the Carolinas contributed $1.2 billion in new loans, while core business growth added $1.6 billion across corporate banking, auto finance, and regional banking. This reveals Huntington gaining share in expansion markets while maintaining momentum in its legacy footprint, reducing dependence on any single geography.

Credit quality remains the bedrock of Huntington's risk management framework. Net charge-offs were an annualized 22 basis points in Q3 2025, down from 30 basis points in the year-ago quarter. Commercial net charge-offs fell to 18 basis points from 31 basis points, while consumer net charge-offs held steady at 27 basis points. The allowance for credit losses increased to $2.6 billion, or 1.86% of total loans, driven by loan growth partially offset by a modest reduction in the coverage ratio. The criticized asset ratio of 3.79% and nonperforming asset ratio trending in a narrow range for several quarters demonstrate that the bank's disciplined client selection and active portfolio management are working as intended.

Capital management reflects a balanced approach to growth and shareholder returns. The CET1 risk-based capital ratio was 10.60% at September 30, 2025, while adjusted CET1 of 9.2% sits within the target operating range of 9% to 10%. Tangible book value per share grew 10% year-over-year, and the bank returned over 45% of earnings through dividends. Management has indicated capacity for approximately $50 million of repurchases per quarter through 2026, signaling confidence in capital generation. Huntington can fund high-return loan growth, support its strong dividend yield, and still have capacity for buybacks—a trifecta that supports total shareholder returns.

Outlook, Management Guidance, and Execution Risk

Management's guidance for full-year 2025 reflects sustained momentum across all key metrics. Loan growth is expected to hit the high end of guidance at approximately 8%, while deposit growth should reach 5.5%. Net interest income guidance was raised to 10-11% growth, driven by better-than-expected loan growth and NIM performance. Fee income guidance increased to approximately 7% growth, and expense growth is projected at 6.5%, resulting in operating leverage of more than 250 basis points—significantly wider than the original budget of 100 basis points. This guidance demonstrates accelerating operational efficiency while maintaining growth investments.

The 2026 outlook provides visibility into continued NIM expansion. Management anticipates standalone NIM will rise at least 10 basis points, driven primarily by fixed asset repricing benefits that could provide seven basis points of lift. This expansion is achievable across Fed funds scenarios ranging from zero to seven cuts, reflecting the bank's neutral asset sensitivity. Loan growth is expected in the mid-to-high single digits, with deposit growth matching loan growth through core deposit generation. Huntington's margin expansion proves structural rather than rate-dependent, reducing earnings volatility.

The Veritex acquisition, completed October 20, 2025, is projected to add two to three basis points to NIM in Q4 and 2026, with purchase accounting adjustments providing additional accretion. The transaction is expected to generate $20 million in core PPNR benefit in Q4, equating to approximately one penny of EPS, while driving one percentage point of efficiency ratio improvement and 30 basis points of ROTCE lift. Management expressed "very confident" in seamless integration based on extensive experience, but investors should monitor the $125-150 million in one-time acquisition expenses expected in Q4 and the pace of revenue synergy realization.

The Cadence Bank acquisition, announced October 27, 2025, represents a more transformative bet. Valued at $7.4 billion in an all-stock transaction, the deal will establish Huntington as the largest bank in Mississippi and a top 10 bank in Alabama and Arkansas by deposits. With $53 billion in assets, $37 billion in loans, and $44 billion in deposits, Cadence provides immediate scale in Texas and Mississippi while creating a platform for further organic investment. The transaction is expected to close in Q1 2026, meaning Huntington will be integrating two major acquisitions simultaneously—a non-trivial execution challenge that will test management's operational capacity.

Risks and Asymmetries

The most material risk to Huntington's thesis is execution on dual integrations while maintaining organic growth momentum. Integrating Veritex's 30+ branches and Cadence's $53 billion asset base simultaneously creates operational complexity that could distract management and delay synergy realization. While Huntington has "extensive experience in integrating acquisitions," the scale and proximity of these transactions increase the risk of customer attrition, systems integration issues, or cultural friction. Any stumble could undermine the geographic expansion narrative and pressure the valuation multiple.

Commercial real estate exposure, while well-managed, remains a key vulnerability. The office portfolio totals $1.4 billion, representing just 1% of total loans and leases, with ACL reserves of approximately 11% providing substantial coverage. However, management acknowledges that "the office sector continues to be an area of uncertainty" with declines in demand and property values across the country. The bank's moderate-to-low risk appetite and relationship orientation have historically helped avoid problematic exposures, but a severe CRE downturn could pressure credit costs and capital ratios.

Deposit competition represents a persistent threat to NIM expansion. While Huntington has outpaced peers on deposit growth and achieved a 37% cumulative deposit beta, the competitive environment remains intense. Management noted they are "not seeing any notable major change in the competitive environment," but acknowledged that broad loan growth across the industry "presumably over time, will drive some higher competition." If deposit betas rise faster than expected or if Huntington loses primary bank relationships, funding costs could pressure the margin expansion story.

Macroeconomic uncertainty creates downside asymmetry. Management's baseline scenario assumes a soft landing with unemployment peaking at 4.8% through 2026, but a hypothetical adverse scenario contemplating recession, 8.4% unemployment, and significant GDP decline would require a hypothetical $0.7 billion increase in the allowance for credit losses. While Huntington's disciplined risk management and moderate risk appetite provide downside protection, a severe economic downturn would pressure loan growth, credit quality, and capital generation simultaneously.

Valuation Context

At $16.59 per share, Huntington trades at 11.6x trailing earnings and 1.24x book value, with a price-to-free-cash-flow ratio of 9.1x and a dividend yield of 3.75%. These multiples compare favorably to regional bank peers: Fifth Third (FITB) trades at 13.1x earnings and 1.5x book, KeyCorp (KEY) at 22.8x earnings (though recovering from prior losses), Citizens Financial (CFG) at 15.3x earnings, and Regions Financial (RF) at 11.3x earnings. Huntington's return on tangible common equity of 10.4% trails Fifth Third's 11.5% and Regions' 11.4% but significantly exceeds KeyCorp's 5.8% and Citizens' 6.7%.

The valuation multiple of 9.1x free cash flow is particularly attractive relative to the bank's growth trajectory and capital return profile. With over 45% of earnings returned through dividends and a baseline assumption of $50 million in quarterly repurchases through 2026, Huntington offers a compelling total return proposition. The bank's enterprise value to revenue ratio of 3.8x sits in line with regional bank peers, suggesting the market has not yet priced in the full benefit of the geographic expansion and NIM inflection story. This implies potential multiple expansion as Huntington demonstrates sustained execution on its strategic initiatives.

Conclusion

Huntington Bancshares has engineered a rare combination in regional banking: industry-leading growth driven by counter-cyclical expansion, visible NIM inflection supported by disciplined deposit management, and pristine credit quality maintained through a moderate-to-low risk appetite. The simultaneous integration of Veritex and Cadence transforms Huntington from a Midwest-focused franchise into a dominant regional player across the South, with immediate scale in Texas and Mississippi providing platforms for sustained organic growth.

The investment thesis hinges on two critical variables: successful execution of dual acquisitions without disrupting organic momentum, and realization of the projected 10+ basis points of NIM expansion in 2026. Management's track record of raising guidance throughout 2025 and delivering 500 basis points of positive operating leverage suggests the operational discipline to navigate these challenges. With shares trading at a discount to peers despite superior growth and a 3.75% dividend yield providing downside protection, Huntington offers an attractive risk-adjusted opportunity for investors seeking exposure to regional bank consolidation and margin recovery. The key monitorables remain integration progress, deposit beta trends, and credit quality in the face of macroeconomic uncertainty.