Huntington Bancshares Sees Upgrade to Buy at UBS

Huntington Bancshares (NASDAQ:HBAN) experienced a sharp 2.6% surge in Wednesday morning trading following an upgrade by UBS to a Buy rating from Neutral. The rationale behind this bullish outlook is the belief that quality and “smart risk” stocks will be favored in the prevailing environment of shifting macro and political dynamics.

Although UBS generally regards Huntington (HBAN) as “fairly defensive,” it is noteworthy that regional banks are traditionally seen as higher beta, offering the potential for greater returns compared to the broader market.

UBS analyst Erika Najarian highlighted several positive catalysts specific to HBAN. In her view, “Solid acquisitions bearing fruit, market share gains, and strategic spending/hiring while peers are more cautious with capital positions the company to exert more influence over their revenue prospects in a year where the rate curve is expected to be volatile.”

Moreover, Huntington (HBAN) is expected to benefit from the Federal Reserve’s decision to pause interest rate hikes. Najarian noted, “HBAN won’t be immune to deposit mix shifts and pricing adjustments during a pause, but it stands to gain considerably from delayed rate cuts, particularly given that 48% of its loans are floating rate.” She estimated a benefit of $13 billion to $15 billion from the repricing of fixed-rate loans in 2024.

UBS has revised its 2024 EPS projection for HBAN to $1.22 from $1.14 and its 2025 EPS projection to $1.40 from $1.30.

Najarian’s Buy rating on HBAN stands in stark contrast to the SA Quant rating of Hold and is in line with the average Wall Street consensus of Buy.