Press Release

DBRS Morningstar Confirms Huntington Bancshares Inc. at ‘A’; Stable Trend

Banking Organizations
November 17, 2022

DBRS, Inc. (DBRS Morningstar) confirmed the ratings of Huntington Bancshares Inc. (Huntington or the Company), including the Company’s Long-Term Issuer Rating of ‘A’. At the same time, DBRS Morningstar confirmed the ratings of its primary banking subsidiary, Huntington National Bank (the Bank). The trend for all ratings at the Company and the Bank remain Stable. The Intrinsic Assessment (IA) for the Bank is A (high), while its Support Assessment remains SA1. The Company’s Support Assessment is SA3 and its Long-Term Issuer Rating is positioned one notch below the Bank’s IA.

KEY RATING CONSIDERATIONS
Huntington’s ratings and Stable trend reflect its diversified and strong banking franchise, which includes a retail banking presence in 11 states, a successful vehicle finance business, a growing payments business, and a commercial banking presence targeting specific industry verticals. Overall, the business mix results in strong pre-provision profitability, including a growing level of non-interest income. The ratings are also supported by Huntington’s strong balance sheet, including ample core deposit funding and liquidity, as well as sound capital levels.

The ratings also consider the current operating environment and the expectation that asset quality metrics will worsen from their current unsustainably low levels. However, we expect previous steps to de-risk the loan portfolio and enhance the risk management process will serve Huntington well in future economic downturns.

RATING DRIVERS
Over the longer term, if Huntington continues to build its franchise, showing top tier financial performance and increased revenue diversification, including higher levels of non-interest income, without increasing its risk appetite the ratings would be upgraded.

Conversely, a downgrade of ratings would arise from a sustained decline in core profitability levels or a significant deterioration in asset quality.

RATING RATIONALE
Franchise Combined Building Block (BB) Assessment: Strong/Good
Huntington operates a strong Midwestern focused banking franchise with significant regional density and scale of operations offering a diverse product set, including commercial, small business, consumer, and mortgage banking services, as well as automobile financing, equipment leasing, investment management, trust and brokerage services. HBAN ranks as the 17th largest U.S. bank by deposits and is the leading SBA lender nationally.

Earnings Combined Building Block (BB) Assessment: Strong/Good
The Company’s earnings power remains solid, supported by a well-contained expense base. However, earnings are somewhat more reliant on spread income than some regional bank peers. Recent results have reflected an improving net interest margin as well as the realized cost savings associated with the TCF Financial Corp. acquisition. For 3Q22, Huntington reported a strong adjusted ROTCE approaching 22% and an efficiency ratio of 54%.

Risk Combined Building Block (BB) Assessment: Strong
Huntington’s risk profile is considered Strong reflecting de-risking post financial crisis, including a lower level of CRE in the loan portfolio as the Company targets a moderate to low risk profile. Additionally, the Company has historically performed well, and better than peers, in Federal Reserve stress tests. Recent results, as they are for the industry, include low and declining levels of non-performing assets and a low level of net charge-offs. Reserve coverage to total loans remains sound at approximately 1.89%. We do expect asset quality metrics to normalize from their current unsustainable low levels.

Funding and Liquidity Combined Building Block (BB) Assessment: Strong
Strong funding and liquidity is supported by an ample core deposit base and sizable level of high-quality investment securities. The Company’s loan to deposit ratio stood at 81% at September 30, 2022 anchoring the strong funding profile.

Capitalization Combined Building Block (BB) Assessment: Good
Capitalization remains sound, including a CET1 ratio of 9.3% at September 30, 2022, providing solid loss absorption capacity. The Company has a targeted a medium term CET1 capital range of 9.0% to 10.0%. The Company has paused stock buybacks in 2022 to capitalize on organic growth opportunities.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://www.dbrsmorningstar.com/research/405448

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance factor(s) that had a significant or relevant effect on the credit analysis

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022) at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings

Notes:
All figures are in U.S. dollars otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organizations (June 23, 2022): https://www.dbrsmorningstar.com/research/398692/global-methodology-for-rating-banks-and-banking-organisations.
In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings, https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022) in its considerations of ESG factors.
The primary sources of information used for this rating include Morningstar, Inc. and Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.
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