Key Takeaways
- Huntington Bancshares was the worst-performing stock in the S&P 500 on Monday after the regional lender lowered its forecast for full-year interest income.
- The bank now expects net interest income (NII) to decline between 1% and 4% this year; in April, it had forecast that NII would range between a decline of 2% and a gain of 2%.
- Huntington and other regional banks have seen their interest margins squeezed by sluggish lending activity and higher deposit costs.
Huntington Bancshares (HBAN) was the worst-performing stock in the S&P 500 in intraday trading on Monday after the regional lender said it expects net interest income to decline in 2024.
Huntington, in a presentation at a conference hosted by Morgan Stanley, said it expects net interest income (NII) to decline between 1% and 4% in 2024 from the prior year. The bank had previously forecast that NII would range between a decline of 2% and a gain of 2%.
Forecast Change Driven by Lower Loan Growth, Higher Funding Costs
“This change is primarily driven by both lower loan growth as we focus on maintaining high marginal returns, as well as somewhat higher funding costs associated with the robust deposit growth,” Huntington Chief Financial Officer (CFO) Zach Wasserman said.
Huntington simultaneously lowered the top end of its forecast loan growth range to 4% from 5%. It also expects to end the year with higher deposit growth than previously forecast.
Huntington in April reported earnings per share (EPS) declined 33% year-over-year in the first quarter as high interest rates weighed on lending activity. Total deposits at the end of the quarter were 5% higher than the prior-year quarter, but competition to attract those deposits squeezed margins.
Largest Banks Have More Diversified Revenue Streams
Meanwhile, the nation’s largest banks have seen their income aided by more diversified revenue streams, including a rebound in capital markets trading.
Smaller lenders could be in for more pain if strong economic data and stubborn inflation force the Federal Reserve to further delay interest rate cuts. Regional banks and their investors could get a better understanding of the Fed’s expected rate cut path when policymakers publish their economic and interest rate outlook on Wednesday.
Huntington shares were down 4.9% to $12.75 as of 1:47 p.m. ET Monday. They are essentially flat in 2024.