HUNTINGTON BANCSHARES DEP(HBANM) - 2023 Q2 - Quarterly Report

Financial Performance - For Q2 2023, the company reported net income of $559 million, or $0.35 per diluted common share, compared to $539 million, or $0.35 per diluted common share in Q2 2022[18]. - Net income attributable to Huntington increased by 16% to $1,161 million, up from $999 million in 2022[36]. - Net income per common share—basic increased by 17% to $0.76 from $0.65 year-over-year[36]. - Net income for the six months ended June 30, 2023, was $1,171 million, an increase from $1,003 million in the same period of 2022, representing a growth of approximately 16.7%[211]. - Net income applicable to common shares for Q2 2023 was $519 million, compared to $511 million in Q2 2022, reflecting a 2% increase[207]. Income and Revenue - Net interest income was $1.3 billion, an increase of $85 million, or 7%, from the year-ago quarter, driven by an $13.7 billion, or 8%, increase in average earning assets[19]. - Noninterest income was $495 million, an increase of $10 million, or 2%, primarily due to favorable mark-to-market adjustments and increases in card and payments processing[21]. - Total noninterest income rose by 2% to $1,007 million, compared to $984 million in the previous year[36]. - Total interest income for Q2 2023 was $2,225 million, a 67% increase from $1,331 million in Q2 2022[207]. - Net interest income after provision for credit losses increased to $1,254 million in Q2 2023, up from $1,194 million in Q2 2022, representing a 5% increase[207]. Credit Losses and Provisions - The provision for credit losses increased by $25 million to $92 million, reflecting a modest deterioration in the macro-economic environment, with the allowance for credit losses (ACL) rising to $2.3 billion, or 1.93% of total loans and leases[20]. - Provision for credit losses increased to $177 million in 2023 from $92 million in 2022, indicating a rise of 92.4%[211]. - The total provision for credit losses for the second quarter of 2023 was $92 million, an increase from $67 million in the same period of 2022, with loan and lease losses contributing $84 million compared to $64 million in 2022[59]. - Net charge-offs (NCOs) increased to $49 million, or 0.16% of average total loans and leases, up from $8 million, or 0.03% in the same quarter last year[81]. - The company reported a $38 million increase in commercial NCOs to $27 million in Q2 2023, compared to net credit recoveries in the prior year[81]. Assets and Liabilities - Total assets at June 30, 2023, were $188.5 billion, an increase of $5.6 billion, or 3%, compared to December 31, 2022, primarily due to a $4.5 billion, or 92%, increase in interest-bearing deposits at the Federal Reserve Bank[22]. - Total assets increased to $188.5 billion as of June 30, 2023, compared to $182.9 billion at December 31, 2022, reflecting a growth of approximately 3.3%[205]. - Total loans and leases increased by 6% to $121,345 million compared to $113,949 million in the previous year[39]. - The total loan and lease portfolio as of June 30, 2023, was $121.225 billion, an increase from $119.523 billion at the end of 2022, with commercial loans comprising 56% of the total[74]. - Total deposits amounted to $148.0 billion, a marginal increase from $147.9 billion at the end of 2022, showing a growth of approximately 0.1%[205]. Capital and Equity - Shareholders' equity increased to $18.8 billion at June 30, 2023, up by $1.1 billion or 6% from December 31, 2022[158]. - The consolidated CET1 risk-based capital ratio was 9.82% at June 30, 2023, compared to 9.36% at December 31, 2022[152]. - The total risk-based capital ratio was 13.82% at June 30, 2023, up from 13.09% at December 31, 2022[152]. - The balance of total equity at the end of the period was $18,838 million in 2023, compared to $17,979 million in 2022, an increase of 4.8%[210]. - Preferred stock increased to $2.484 billion from $2.167 billion, marking a growth of about 14.6%[205]. Economic Outlook - The company expects a slowdown in economic growth over the next 12 months, with inflation moderating through 2024[25]. - The company anticipates the unemployment rate to peak at 4.2% by the end of 2024, with GDP forecasted at 2.3% by Q4 2024[89]. - The estimated unemployment rate is projected to rise to 7.1% by the end of 2023, which is 3.3% higher than the baseline scenario[201]. - A hypothetical adverse scenario could lead to an increase in ACL by approximately $1.2 billion, reflecting sensitivity to unemployment rate changes[202]. Operational Efficiency - The efficiency ratio improved to 55.9% in Q2 2023, down from 57.3% in Q2 2022, indicating better operational efficiency[33]. - Personnel costs for the second quarter of 2023 rose to $613 million, a 6% increase from $577 million in the same quarter of 2022, reflecting higher expenses due to the Capstone Partners acquisition and merit increases[62]. - Total noninterest expense for the second quarter of 2023 was $1.1 billion, a 3% increase from $1.018 billion in the same quarter of 2022, with no acquisition-related expenses compared to $24 million in the prior year[62]. Strategic Initiatives - The company completed the acquisition of Torana in May 2022, enhancing its digital payments capabilities, and Capstone Partners in June 2022, expanding its investment banking services[15][16]. - The company remains committed to expanding its payments capabilities and developing unique solutions for diverse client segments, including the Huntington ChoicePay[170]. - The organizational realignment in Q2 2023 resulted in two business segments: Consumer & Regional Banking and Commercial Banking[162]. Risk Management - The company has maintained a moderate-to-low risk appetite, with a focus on early identification and management of credit risk through quantitative measurement and portfolio diversification strategies[71]. - The company’s market risk management processes are primarily focused on interest rate risk, with ongoing assessments of potential losses from changes in market conditions[101]. - The balance sheet is asset sensitive, with hedging activities supporting increased sensitivity in rising rate scenarios while mitigating impacts in falling rate scenarios[106].