Huntington Bancshares Inc.'s CEO is not concerned that the industry's recent credit quality blips are indicative of broader issues.
Large banks' recently disclosed exposure to two bankruptcies and fraud led to industry-wide sell-off on Oct. 16, but Columbus, Ohio-based Huntington's President and CEO Stephen Steinour believes they are one-offs and the industry's overall credit quality remains intact.
"I suspect there are isolated issues that are in the industry, but I think on the whole, the industry has derisked since the [Global Financial Crisis]" President and CEO Stephen Steinour said during a call to discuss third-quarter earnings. "There'll be some episodic moments and some one-offs, but I think the industry is in a good shape."
Referencing JPMorgan Chase & Co. CEO Jaimie Dimon's comments on Oct. 14 about credit issues cropping up, Steinour disagreed with his take.
"I'm obviously aware of Jamie's position/comments this week, but I don't see it broadly affecting the industry, and many of those who reported are suggesting the consumer is in relatively good shape," Steinour said. "We certainly are not seeing forward indicators in terms of delinquency or other measures."
At September 30, Huntington's net charge-offs were 0.22% of average loans, and it ended the quarter with an allowance for credit losses of 1.86% of total loans and leases.
Banks tightened their credit standards after the crisis, leaving room for nondepository financial institutions (NDFIs) and private credit to gain market share.
"That's part of what you're seeing with the rapid rise in shadow banking system or NDFIs, whatever you would call it. I think the banks are in a much better position today, particularly those that are broadly diversified," he added. "We've managed with this aggregate moderate- to low-risk appetite in place."
As the private credit industry has grown, so too has banks' exposure to NDFI lending, which has triggered concerns among investors and regulators.
Also during Huntington's earnings call, the CEO shut down the possibility of M&A in the near future, as it gets ready to close its acquisition of Veritex Holdings Inc. on Oct. 20.
"We've done three combinations in 15 years," Steinour said. "At some point, there'll be something else. But our focus is driving the organic growth of the company."
Then he preemptively addressed whether Huntington bid on Comerica Inc., involved in a proposed acquisition by Fifth Third Bancorp, saying, "We were not involved in Comerica."
Separately, the company updated some of its guidance, exclusive of the Veritex transaction, including increasing full-year fee income guidance to 7%, from between 4% to 6%. It also raised its stand-alone net interest income guidance for the year to between 10% to 11%, from 8% to 9%, due to better-than-expected loan growth and net interest margin exceeding expectations.
Loan growth and deposits are now expected to be at the high end of the previous guidance for both, so loan growth is anticipated to be about 8% for the year, or 9% to 9.5% including Veritex, while deposit growth is likely to be about 5.5%, or 6.5% to 7% including Veritex.
