New York, February 28, 2020 -- Moody's Investors Service, (Moody's) has affirmed all
of the ratings and assessments of Huntington Bancshares Incorporated and
its subsidiary, Huntington National Bank. The parent company
is rated Baa1 for long-term senior unsecured debt and Baa1 for
subordinated debt. Its bank subsidiary has an a3 standalone Baseline
Credit Assessment (BCA), deposit ratings of Aa3/Prime-1,
a senior unsecured debt rating of A3, Counterparty Risk Ratings
of A3/Prime-2, and Counterparty Risk Assessments of A2(cr)/Prime-1(cr).
RATINGS RATIONALE
The affirmation of Huntington's ratings and assessments reflects its balance
sheet strengths characterized by robust core deposit funding and good
capitalization, along with a conservative asset risk profile,
which combined support its solid profitability. These franchise
strengths have solidified Huntington's credit profile and are the
basis for the stable outlook.
Huntington, headquartered in Columbus, Ohio, operates
a regional banking franchise across seven US states as well as some national
lending businesses. Through its regional presence, it maintains
a strong deposit franchise, particularly in Ohio which accounted
for over 60% of its total deposits and approximately 37%
of its total loans as of 31 December 2019. Its deposit franchise
supports its strong funding profile by limiting the need for confidence-sensitive
wholesale funding, which poses refinancing risk. It also
supports profitability through the low cost of funding its balance sheet.
Huntington's asset quality remains strong, as evidenced by
a problem loan ratio of 1.6% as of 31 December 2019.
While low, this level is higher than some similarly-rated
peers because Moody's includes accruing troubled debt restructured
loans (TDRs) in its calculation. Excluding TDRs, the problem
loan ratio reduces to 0.6% as of the same reporting date.
Huntington actively works with its commercial and consumer borrowers,
an approach that leads to a higher amount of TDRs relative to peers.
Nevertheless, Moody's believes Huntington's TDR book
is of higher quality and incorporates this characteristic in its evaluation
of Huntington's asset risk. These TDRs have shown good performance
in line with the rest of the loan book, albeit under a favorable
economic environment.
Moody's assessment of Huntington's strong asset quality is
also supported by its loan portfolio diversity and conservative underwriting.
Its commercial portfolio is granular and does not have material sector
concentrations. Huntington is a long-standing participant
in the automobile sector with 17% and 5% of its loans in
indirect auto and auto dealer services, respectively, as of
31 December 2019. The company's conservative underwriting
is evidenced by these portfolios' good credit performance over the
long-term.
Moody's believes that Huntington has an above-peer average
resilience to stress, though its capitalization levels are modest
relative to same-rated peers. In the Federal Reserve's
supervisory stress tests it is typically within the top quartile of performers.
Its capitalization has increased over the last year to a common equity
tier 1 ratio of 9.88% as of 31 December 2019, 23 basis
points higher than a year ago, and towards the top of management's
operating guideline range of between 9 and 10%. This positive
trend is the opposite of many large US regional bank peers that have lowered
capitalization in recent periods and is reflected in Moody's assessment
of Huntington's capitalization.
Huntington generates solid and sustainable profitability, which
improved in 2019 relative to 2018 despite pressure from lower interest
rates. Huntington reported a net interest margin (NIM) of 3.12%
for the fourth quarter, which is above the large US bank average
and declined 29 basis points over the last year as a result of lower asset
yields. Its net interest income increased with modest average loan
growth. About 70% of its 2019 net revenue was net interest
income, with the remainder from a variety of noninterest income
sources, which is consistent with its large US bank peers.
Huntington has also improved its operational efficiency while continuing
to pursue a number of digital and mobile technology initiatives,
which will support its solid earnings generation.
Huntington's exposures to environmental and social risks are low
and moderate, respectively, consistent with our general assessment
for the global banking sector. We do not have any particular concerns
with Huntington's governance. The company shows an appropriate
risk management framework commensurate with its risk appetite.
What Could Change the Rating Up
Upward rating pressure could arise from an increase in capitalization
or significantly higher levels of profitability. A reduction in
market funding and increase in liquid assets would also be positive for
the BCA and ratings.
What Could Change the Rating Down
Downward pressure on the BCA and ratings could emerge if there were a
material increase in problems loans or credit losses or if there was evidence
of a weakening in underwriting standards. Lower capitalization
or an increase in market funding reliance would also be negative.
The principal methodology used in these ratings was Banks Methodology
published in November 2019. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Affirmations:
..Issuer: Huntington Bancshares Incorporated
....Pref. Shelf Non-cumulative,
Affirmed (P)Baa3
....Senior Unsecured Shelf, Affirmed
(P)Baa1
....Subordinate Shelf, Affirmed (P)Baa1
....Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa1, Stable
..Issuer: Huntington National Bank
.... Adjusted Baseline Credit Assessment,
Affirmed a3
.... Baseline Credit Assessment, Affirmed
a3
.... LT Counterparty Risk Assessment,
Affirmed A2(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... LT Counterparty Risk Rating (Foreign
Currency), Affirmed A3
.... LT Counterparty Risk Rating (Local Currency),
Affirmed A3
.... ST Counterparty Risk Rating (Foreign
Currency), Affirmed P-2
.... ST Counterparty Risk Rating (Local Currency),
Affirmed P-2
.... LT Issuer Rating, Affirmed A3,
Stable
.... LT Deposit Rating (Local Currency),
Affirmed Aa3, Stable
.... ST Deposit Rating (Local Currency),
Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed A3, Stable
..Issuer: FirstMerit Corporation
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
..Issuer: FirstMerit Bank, N.A.
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
..Issuer: Huntington Bancshares Capital Trust I
....Backed Pref. Stock, Affirmed
Baa2 (hyb)
..Issuer: Huntington Capital II
....Backed Pref. Stock, Affirmed
Baa2 (hyb)
Outlook Actions:
..Issuer: Huntington Bancshares Incorporated
....Outlook, Remains Stable
..Issuer: Huntington National Bank
....Outlook, Remains Stable
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rita Sahu, CFA
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
