管理層發言
Greetings, and welcome to the Huntington Bancshares second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Eric Wasserstrom.
Thank you, operator. Good morning, and welcome everyone to our second quarter call. Our presenters today are Steve Steinour, Chairman, President, and Chief Executive Officer, Brant Standridge, President of Consumer and Regional Banking, and Zach Wasserman, Chief Financial Officer. Brendan Lawlor, Chief Credit Officer, will join us for Q&A. Earnings documents, which include our forward-looking statements, disclaimer and Non-GAAP information, and copies of the slides we will be reviewing today, are available on the investor relations section of our website, which is www.ir.huntington.com. As a reminder, this call is being recorded, and a replay will be available starting about one hour after the close of the call. With that, let me now turn it over to Stephen.
Thanks, Eric. Good morning, and thank you for joining us. Starting on slide three, we delivered an exceptional quarter marked by strong organic growth, expanding revenue and profitability, and the successful completion of the Cadence systems conversion. We achieved these results while continuing to invest in our businesses, technology, and support areas. These accomplishments reflect exceptional preparation, coordination, and execution from thousands of colleagues, and I want to thank our colleagues for their tremendous work. They managed a complex conversion while continuing to serve customers, generate growth, and deliver another strong quarter. The operating environment remains constructive. Visibility on economic trends has improved since last quarter. Customer activity remains steady across our footprint, and commercial demand is broad based. Our clients continue to take a long-term approach to investment decisions. Huntington is now at an inflection point. Our core businesses are performing at a high level, our conversions are complete, and we are positioned to capture the benefits of our investments, as well as the recent partnerships and expanded footprint. We continue to view Texas and the South as a springboard to significant future growth now and for the long term. We have a terrific team of new leaders and colleagues who are excited about the opportunities ahead and are already delivering additional revenue. We are laser focused on the continuing integration of our colleagues and working together as one team on behalf of our customers and shareholders. All of these efforts create a clear path toward accelerating organic growth in revenue, earnings, and increasing tangible book value in the years ahead. There are four key messages I'd like to leave you with. First, we have strategically repositioned our company with substantial operating scale across regions and capabilities, creating multiple growth engines for the long term. Second, we are laser focused on generating organic growth and are well-positioned to expand across the franchise. Third, we are delivering on our commitments on partner cost and revenue synergies. Fourth, our execution is powering robust long-term value creation. We are growing revenue and earnings, expanding ROTCE, increasing tangible book value, and generating capital that allows us to invest in the franchise while increasing shareholder value. On slide four, our strategy continues to produce leading results reflecting the strength of our core franchise, contributions from our investments and partnerships, and benefits of disciplined execution across the company. The outcomes reinforce our confidence in achieving our 2027 ROTCE target of 18%-19%. Turning to slide five. The core franchise continues to perform at a very high level. Since 2024, we've delivered peer-leading organic loan and deposit growth while completing two bank combinations and conversions, as well as making substantial progress on the integration work that is expanding our earnings power and long-term growth opportunities. Turning to slide six. Our culture remains one of the most important competitive advantages and has been acknowledged through the numerous awards that we've won. While driving the integrations of Veritex and Cadence, we've received several new awards, including United States Best Digital Bank for Consumers by Euromoney, J.D. Power Best Mobile Banking App and Website Experience for Customer Satisfaction, Forbes as the Best Place to Work, and 15 Coalition Greenwich Best Bank Awards, including number one for overall satisfaction, number one for ease of doing business with, and number one for trust. I am very proud of what our colleagues have delivered for our customers and shareholders. With that, I'll now hand it over to Brant to discuss the successful Cadence conversion, which he has led, and the many opportunities ahead as we continue realizing the benefits of the partnerships. Brant, thank you for your outstanding leadership, and thank you to our colleagues across Huntington and Cadence. Your dedication, teamwork, and focus on serving customers continues to be outstanding.
Thank you, Steve. Turning to slide seven. Last month, we successfully completed the Cadence systems conversion with strong engagement from both customers and colleagues. I want to reiterate our thanks to colleagues across the entire company for the dedication and preparation that made this possible. The conversion was completed just 235 days after announcement and reflects the strength of our integration playbook, our disciplined execution, and the deployment of AI-enabled tools to automate a number of the manual processes. Importantly, our customers' and colleague engagement remains strong and, in a result that very few banks achieve, we actually grew deposits during the conversion weekend and the weeks that followed. This outcome demonstrates both the quality of the customer experience and the trust customers place in our franchise and in our colleagues that continue to serve them. During this conversion process, we trained and transitioned 4,500 colleagues onto Huntington systems. We onboarded hundreds of thousands of customers to Huntington platforms, converted ATM and ITM locations, completed signage changes across more than 4,000 signs, and provided early customized treasury products, onboarding, and training to over 6,000 high-value commercial customers. These are tangible examples of the detailed planning and thoughtful execution that went into the conversion. With this major operational milestone now behind us, our focus shifts from conversion to growth. Turning to slide eight. We remain on track to attain the $365 million in cost synergies in the fourth quarter, and the revenue opportunity is developing as we planned. Let me highlight just a few examples. One of our core objectives is to bring Huntington's broader capabilities, larger balance sheet, and specialized expertise to customers across the entire Cadence footprint. We are already seeing meaningful proof points. For example, our pipelines reflect expanding client commitments by nearly $1 billion across energy, commercial real estate, and our auto floorplan businesses, including more than $500 million of additional commitments in energy and CRE, and approximately $440 million of auto floorplan pipelines. These opportunities simply were not available prior to combining the franchises. Capital markets is another strong example. Since closing, we've completed more than 10 transactions with customers in the Cadence footprint, generating approximately $12 million of fees while building a robust pipeline of future opportunities. We're increasingly being brought into larger, more advisory client discussions, where our scale and capabilities and expertise allow us to capture additional economics and strengthen our customer relationships. Payments is developing similarly. Our merchant services, treasury management, and commercial card capabilities have created new revenue opportunities while helping us deepen primary operating relationships with customers. Another encouraging proof point is how the Cadence franchise is performing from a deposit perspective. Since closing, production has remained in line with our targets as we successfully transition the franchise towards Huntington's relationship-based model. We're retaining approximately 80% of maturing CD balances. We've reduced higher cost wholesale funding and broker deposits, and we're increasing the growth of checking accounts. We also remain disciplined with pricing. With our pricing analytics capabilities, we're able to optimize rates at the local market level, allowing us to remain competitive and protect customer relationships. Another key area of synergy is digital deposit acquisition. Since February, new checking household acquisition across the Cadence footprint has almost doubled from approximately 3,100 households per month to 5,900 households per month. It's important to note this is before we have undertaken any of the planned and substantive marketing investment in these regions, and is an early proof point of the power of Huntington's digital deposit acquisition capabilities. Now as we enter the third quarter, we're excited to begin the ramp-up of our marketing activities to drive further engagement and activity. These results reinforce a point we've long emphasized. Our objective is not simply to gather deposits. Our objective is to grow profitable primary bank relationships. That's why household growth, checking account growth, and customer engagement metrics are so important to us. Those relationships ultimately create opportunities across payments, wealth, treasury management, lending, and capital markets. At the same time, we're adding experienced bankers across high growth markets including Dallas, Houston, Fort Worth, Austin, Nashville, and Atlanta, while expanding the private bank, specialty banking, and treasury management capabilities through the Cadence footprint. Taken together, these results reinforce what attracted us to Cadence in the first place. This partnership was never simply about cost synergies. It was about a springboard for growth across Texas and the South. While we're still early in realizing the full opportunity, the customer activity, production trends, revenue synergies, deposit performance, and pipeline we're seeing today reinforce our confidence in the long-term growth and earnings potential of the combined franchise. With that, I'll turn it over to Zach to discuss the quarter's financial results in detail.
Thank you, Brant. Turning to slide nine. Our second quarter results demonstrate strong execution across the company. I want to underscore three key ideas. First, the core franchise continues to perform exceptionally well. We delivered another quarter of strong organic loan and deposit growth, expanded fee revenues, and demonstrated excellent credit performance, all reflecting our disciplined approach to growth. Second, integration execution is translating into financial benefits, with Veritex cost saves achieved, Cadence cost synergies on track, and revenue synergies building as expected. Third, we continue to make meaningful progress toward our financial targets. Adjusted PPNR increased 12% quarter-over-quarter. Net interest income increased 8.5%. Value added fee revenues increased 15%, and we generated 210 basis points of positive operating leverage on a trailing 12-month basis. As we move through the back half of the year, we expect the fourth quarter to provide a clear view of the earnings power of the combined organization, supported by continued growth, expense discipline, and synergy realization. Slide 10 demonstrates why we have such strong conviction in this outlook. Our results underscore our tremendous revenue momentum. Growth continues to be driven by three factors. First, organic loan growth remains strong and broad-based across the franchise. Second, deposit growth continues to outpace loan growth, providing ample core funding to support future expansion. Third, our investments in value-added fee services continue to produce strong returns. Payments, wealth management, and capital markets each generated excellent growth that we expect to continue for many years to come as we sustain our investment in these capabilities. This revenue growth, combined with our focus on generating operating efficiencies, is driving high PPNR growth. These elements form the core of our value creation flywheel. Our differentiated model generates peer-leading revenue growth. That increasing revenue, coupled with sustained reengineering of our baseline operating expenses, enables us to maintain a high growth rate of investment back into the business. These ongoing investments create sustainable and increasing competitive differentiation. This creates a virtuous cycle, enabling us to continue to deliver high revenue growth, superior profitability, and generate substantial capital returns to our shareholders. Let me now walk through the drivers of the quarter's results. Turning to slide 11. Broad-based loan growth continued in the quarter. Average loans increased $15 billion, or 8.6%, sequentially into the second quarter. Normalizing for the day count effect of the Cadence balance sheet in the first quarter, average loans increased to $2.2 billion or 1.2%, an outstanding level of continued organic expansion. This growth was led by commercial and industrial categories, with significant contributions from corporate and specialty. We drove particularly strong activity from the financial institutions group, industrials, diversified businesses, corporate mortgage finance, and Native American financial services, with additional contributions from asset finance and middle-market C&I. Commercial real estate balances modestly declined during the quarter as planned, and auto production was lower. Turning to slide 12. Q2 was another quarter of robust deposit growth as we core fund our balance sheet. Average deposits increased $18.8 billion or 9.2% sequentially into the second quarter. Normalizing for Cadence day count in Q1, deposits grew organically $4 billion or 1.8% sequentially, outpacing loan growth. Importantly, the growth continues to be driven by customer acquisition and deepening of primary bank relationships, which supports solid core funding. Primary banking relationships increased across each of our customer segments, with consumer PBRs growing 4%, business banking PBRs growing 5%, and commercial PBRs growing 8% year-over-year. Deposit costs increased six basis points during the quarter, including approximately one basis point from the full quarter impact of Cadence and five basis points from the legacy Huntington franchise. Our deposit strategy remains disciplined, focused on driving valuable and granular funding that enables us to sustain our high growth rate while maintaining attractive spreads. As Brant discussed, we are also seeing encouraging results from our early optimization efforts within the Cadence footprint, including strong retention of maturing CDs and production trends that are tracking in line with our expectations. With the conversion successfully behind us, we are now positioned to execute on optimization across the combined deposit portfolio. Turning to slide 13. This combination of strong core funded asset growth generated $2.1 billion in net interest income, a sequential increase of 8.5%. As we look out over the remainder of the year, we expect loans to grow sequentially each quarter going forward, funded by continued expansion in core deposits. Pipelines continue to support our conviction and our continued revenue momentum over the back half of 2026 and into next year. Turning to net interest margin on slide 14. Our NIM increased 10 basis points year-over-year and declined three basis points sequentially. The year-over-year increase reflects the migration of our assets into higher yielding categories combined with yield expansion. While the quarter-over-quarter decline reflected the full quarter impact of the Cadence balance sheet and higher funding costs. We believe Q2 is the trough for our NIM and expect expansion from here driven by three factors. First, we expect to benefit from additional fixed asset repricing. Second, toward the end of the quarter, we released the additional liquidity we had intentionally added in the first quarter. While the prior addition of this liquidity was appropriate from a risk management position and neutral to NII dollars, it did create a temporary drag on NIM, which we've now alleviated. And third, as I noted, we see meaningful opportunities for optimization within the Cadence deposit portfolio. These actions will partially mitigate further increases in overall deposit costs. Turning to slide 15. Fee income continues to be a significant source of strength across all categories and an important contributor to our growth flywheel. We grew value-added fee revenues more than 60% year-over-year. Excluding the impact of Cadence and the acquisition of the Janney Capital Markets business, as well as last year's sale of our corporate trust business, value-added fee revenues grew approximately 30% on an organic basis year-over-year, reflecting exceptionally strong underlying core momentum. In our key strategic areas of focus, payments grew 10% year-over-year, wealth management grew 12% year-over-year, capital markets grew 46% year-over-year, and loan and deposit fees grew 19% year-over-year. Importantly, these businesses are benefiting from both strong organic growth and the additional opportunities created by our new partnerships. We believe this strength contributes to a powerful revenue and earnings profile that is increasingly diversified, with growing emphasis on capital-light recurring fee revenues that support our ability to deliver sustained growth over time. Moving to expenses on slide 16. Non-interest expense was $1.8 billion, up $35 million from the prior quarter. Excluding one-time items, non-interest expense was $1.7 billion, up $145 million sequentially, driven primarily by the full quarter impact of the Cadence expense base. Other drivers included $27 million of increased personnel costs due to higher incentive and performance-based compensation, the full quarter impact of merit changes, and day count. We remain on track to achieve the combined $435 million of run rate expense synergies from Veritex and Cadence cumulatively by the fourth quarter. Importantly, in addition to those partnership-driven expense synergies, our ongoing expense efficiency reengineering program is continuing to drive meaningful benefit. This year, we're on track to deliver more than 1.5% expense reduction to our baseline operating expenses, well in excess of our long-term 1% per year target. This creates additional investment capacity to fuel long-term growth. As noted, these combined actions drove 210 basis points of positive operating leverage over the past year, while we continue to invest across our franchise. We are tracking toward our targeted Q4 core efficiency ratio in the mid to low 54% range. Turning to slide 17. Our capital position remains strong, supporting organic growth, a solid dividend yield, and increased capital return through share repurchases. We've consistently grown tangible book value at our targeted high single digit to low double digit pace over the last few years. Year-to-date, we have completed $310 million of our $550 million planned share repurchase program for 2026. We expect to repurchase an additional $1.1 billion-$1.2 billion in 2027. Slide 18 summarizes how we create shareholder value through disciplined management of growth, expenses, capital, and integration execution. Our underlying earnings power generated 13% tangible book value per share growth before distributions, enabling us to sustain a 3% dividend yield and repurchase $160 million of shares in the quarter. Year-to-date, share repurchases have reduced outstanding shares by approximately 1%. The business continues to generate very strong return on capital. Adjusted return on tangible common equity was 16.7% on a trailing four-quarter basis and 17.5% in Q2. The power of the core businesses, augmented by the partnerships and integration, position us to drive the next phase of value creation, with ROTCE forecasted in the 18%-19% range. Turning to slide 19. Credit performance remains strong and consistent with our expectations. Net charge-offs continue to trend near the low end of our guided range, and we hold substantial reserve coverage. Our criticized asset ratio declined during the quarter. We expect that trend to continue as we execute our normal credit management strategies. NPAs remain elevated due to increases in government guaranteed loan categories, which have virtually no loss content, and downgrades of select commercial credits. Importantly, we continue to see stable trends across the broader portfolio. We're very pleased with credit performance and remain confident in maintaining top-tier credit outcomes. Turning to slide 20. This year's CCAR results again reinforce the strength and consistency of our credit profile under the Federal Reserve's severely adverse scenario. Huntington delivered a top-tier outcome on modeled credit losses with cumulative loan losses of 5.9% of average loans, which is second lowest in our regional peer group and an improvement from 6.1% in the 2024 cycle. Just as importantly, our allowance remains strong relative to the Fed's modeled stress losses, underscoring the resilience of the balance sheet. The strength of our franchise has been validated time and again in the Fed's stress tests. The results demonstrate the strength of our through-the-cycle approach to credit and capital management, as well as the durability of our financial performance, while supporting continued capacity to fund organic growth and return excess capital over time. Turning to slide 21. The trends on this slide demonstrate the strength of our operating model. We expect continued revenue momentum supported by loan and deposit growth, strong fee income, cost and revenue synergy realization, and ongoing efficiency enhancement. As those factors come together, as I noted earlier, we expect the fourth quarter to provide a clear view of the earnings power of the combined company and a solid launch point for 2027. We expect this strong revenue formation, combined with expense synergies and our continued focus on efficiency to drive solid PPNR growth. As I noted, we're on track to achieve a core efficiency ratio in the mid to low 54% range by the fourth quarter. The outcome of all of these measures is that we anticipate continued high tangible book value per share growth while returning capital to shareholders. Turning to slide 22. Over the last year, we've transformed the franchise and successfully entered new markets, building scale in regions that will support strong secular growth opportunities for many years to come. This positions us to drive significant value creation over short and longer-term horizons. We continue to march toward the expectations we've set for 2027. These include EPS growth of approximately 30% from the 2025 level, driven by a combination of strong organic growth, expanding fee income, and increasing revenue synergy realization. Similarly, continued operating leverage, expense discipline, and full synergy capture support further profitability improvement and our expected progression to the 18%-19% ROTCE. Combined with ongoing tangible book value per share growth and meaningful share repurchases, we believe these factors create a clear line of sight to our 2027 earnings objective of $1.90-$1.93 per share. Turning to slide 23 for our full-year outlook. As we look at the balance of 2026, the key message is that we expect continued momentum and progress toward our 2026 and 2027 goals. We continue to manage dynamically and have multiple growth levers to achieve our objectives. Looking at net interest income, we expect continued NII expansion driven by high-quality loan growth and core deposit funding, with some incremental pressure on funding costs. Our outlook for average loans is now tracking at or above the high end of the range, reflecting continued end market demand, particularly among commercial customers. We also expect continued strong deposit growth to core fund this expansion, driven by growth in our primary bank relationships. Based on these expectations, we expect to be at the bottom end of the NII range or perhaps modestly below it. Turning to non-interest income, performance across payments, wealth, and capital markets remains very strong. Based on year-to-date performance and pipeline activity, we continue to view the business as tracking to the high end of or potentially above our guidance range. These expectations support our revenue growth outlook, and we're tracking toward the overall level of revenue growth embedded in our full-year guidance while maintaining our discipline around pricing, credit, and capital allocation. On expenses, we continue to execute against our expense synergy targets and remain on track to achieve the $435 million of annualized run rate cost synergies by the fourth quarter. We're accomplishing this while continuing to invest in attractive growth opportunities and re-engineer our core expense base. The strength in our fee income streams creates some modest upward pressure on expenses, which we intend to mitigate through management actions. Credit performance remains excellent, and we now expect net charge-offs to be in the lower half of our 25 basis points-35 basis point charge-off range. Our tax rate will also likely come in a bit better than our current full-year outlook, given the strong performance in the first half of the year. We expect to repurchase at least $550 million of stock in total this year. The key takeaway here is that the fundamental drivers of our earnings outlook remain intact, and we're excited about the trajectory of our business as we enter the second half of the year and look forward into 2027. Turning to slide 24. Our operating model continues to perform, generating strong revenue, earnings, tangible book value per share growth, and strong ROTCE. This supports the investments we make in our capabilities, which enable our long-term competitive vibrancy and the substantial value we create for shareholders. With that, we'll conclude our prepared remarks and move to Q&A.
Thank you, Zach. We will now take questions. We ask that, as a courtesy to your peers, each person ask one question and one related follow-up question. If you have additional questions, please return to the queue. Thank you.
分析師問答
Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Erika Najarian with UBS. Please proceed with your question.
Hi. Good morning. I have to say this: the stock opened down five percent and it's still down five. I think the Street is feeling somewhat uncertain that you put in your slide that your outlook is unchanged, but Zach said that the net interest income outlook was likely at the low end or below. Could you unpack that dynamic? You mentioned incremental pressure on deposit costs. Could you break down what's happening from a competitive dynamic standpoint versus some of the deposit cost optimization? Also, what are you assuming for deposits specifically without a Fed rate hike and how you expect the margin to perform with a rate hike?
Sure. Thanks, Erika. Good morning, it's great to be with you. Maybe I'll address some of the various points you've raised in your comments and question, then I think Brant will tack on as well. Look, on the guidance, I'll just share our overall revenue outlook continues to be very robust. Ultimately our objective is driving overall revenue growth. We're seeing on spread, the mix is shifting more toward volume-driven. We're expecting to see quite strong loan growth here as we go into the back half of the year. Remember that the second half of the year is typically our strongest sequential period in terms of loan growth; we're seeing quite a bit of strong pipelines and indication that we'll see solid loan growth. I do expect to see NIMs also expand into the third and fourth quarter, driven by the factors we discussed. That will help us to drive very strong spread revenue growth. The other thing that's balancing that, importantly, is continued outperformance on fees. We continue to see fees grow even stronger than our expectation. Just as I noted that we might be at the lower end or potentially just a touch below on the NII, we expect to be at the higher end or above on fees. We think the net of those things will continue to allow us to track toward that approximately 37% overall revenue growth this year. On deposit cost, what I'll tell you is, we're not expecting any change in the competitive environment. It is competitive, but we're also seeing great opportunity to drive volume growth and to ultimately drive optimization within the overall combined deposit base, particularly now that we've gotten through the Cadence systems conversion. Really confident about our ability to execute on that. Maybe Brant, you want to pick up and share?
Yeah. Erika, this is Brant. If I could just tag on and highlight the point Zach just made, it is competitive, but we still see it as being rational. As you know and we've discussed in the past, we look at pricing across 56 different rate regions in our new expanded footprint, and we have a very granular view of it. We're still seeing similar pricing to what we saw in the first quarter. We're still seeing the Midwest be the most competitive market we're in. Obviously, the Carolinas, the Southeast, and Texas slightly trail that. As Zach described, we have a number of levers that give us confidence going forward. First of all, our focus has been and still is on consumer and business primary bank acquisition. We're seeing acquisition rates that are exceeding our expectations. In fact, with the addition of the Cadence footprint, checking household acquisition is actually up 31% year-over-year. Just as a point of context, 50% of our deposits are consumer, 50% are business. When you look at the opportunities in both, I'll start with the business side. One of the areas that gives us a lot of leverage into the future is the national commercial deposit verticals that have been created and expanded. In fact, if you just look at our mortgage servicing vertical that we stood up a little over a year ago, that group added $1.7 billion in deposits just this past quarter. That is one example. On the consumer side, we're seeing production expectations in the Cadence footprint be above our expectations. Digital acquisition in the new footprint is up 60% since January. When you talk about the cost component, we are seeing the mix change that we had anticipated. You referenced revenue synergies, one of the components of the revenue synergies was the mix change. We are seeing now our concentration of liquid deposits—savings, checking, MMA—be 80% of our volume versus 40% previously. Not to forget about this, but we have been investing in the Carolinas. We opened two branches this time last year. We've opened eight since the beginning of this year. Those branches have generated over $300 million in new deposits. Frankly, they are about double the expectations that we had originally set. Lastly, I'd mentioned Colorado and we have also invested specifically in Chicago. Those markets, on a combined basis over the course of the last year, have generated over $800 million in growth. We do look at pricing on a very granular basis. As it relates to our ability to respond to either a rising rate environment or a falling rate environment, this data that we have around the front book and the back book really gives us the ability to be nimble no matter what that environment would be.
Erika, this is Steve. I'll just add for a minute. We've got a more likely rising rate environment. We chose to front-end load a bit given rising expectations. Second half loan generation's typically much better than first half. Fourth quarter is our best quarter typically. We're getting ahead of it, and that's a conscious decision. Very pleased to have the conversion behind us because now we can focus on running the core with the benefit of the entire franchise.
Got it. Thank you for all of that. My follow-up is this: given that there are not many stocks I cover that are less than 10x next year's earnings, the jumping off point to the $1.90-$1.93 really matters. Zach, you mentioned higher PPNR at 4Q26 on slide 21. The Street on an operating basis is at $1.34 billion. Is the Street in the right place? Granted, there are puts and takes in terms of maybe a little adjustment to NII. PPNR for 4Q26?
Yeah, appreciate it. Look, I'm not going to talk specifically about consensus. I'll share with you our outlook and you can interpret that and create models. What I'll tell you is our expectations for growth into 2027 are unchanged. We continue to be marching toward those objectives. They're threefold in our view. One is the earnings per share of $1.90-$1.93. The second is return on tangible common equity and generating significant positive return on capital between 18%-19%. Importantly, continue to drive capital accretion on a tangible book value per share basis of greater than 10%. We're on track for that. If I think about the back half of the year, I think Q4 will really be the strongest quarter from an earnings perspective, and it'll be incrementally driven by significant run rate cost synergies from Cadence, which now that the conversion is through we're executing during the course of this quarter, Q3, and it will be fully in run rate into Q4. That will be the biggest sequential driver of increased profitability into the fourth quarter. I expect the Q4 EPS to be very strong. By my calculus, it will imply low teens year-over-year growth in terms of that trended Q4 level into the full year 2027 earnings per share, which is well within the current earnings growth trend we've got. If I double-click into that and share my view of how the model would work: high single digits loan and deposit growth, a stable to rising NIM, strong spread revenue, and continued extraordinarily good fee revenue. I hope we can unpack more of that in this call because we are seeing outperformance on fee revenue. We expect to see high single digit to likely low double-digit fee revenue growth. On expenses, we're expecting to see between 400 and 500 basis points of total operating leverage. That will be a function of the full run rate of the cost synergies and another year of baseline re-engineering of our cost base. One of the things I shared in the prepared remarks: for the last seven years, we've generated 1.3% on average per year reduction in OPEX. 2026 is actually more than that at 1.6%. Next year will be more again; we already have that program defined. The operating actions are already part of our plan. Couple that with stable credit and a lower share count from all the repurchases we're doing, and those are the ingredients to get to a teens-level EPS growth. There's a lot of the year left to play out in 2026. We're continuing to drive toward that extraordinarily strong Q4 and then into 2027.
Erika, it's Stephen. Just to emphasize a couple of points. We're 17.5% on adjusted ROTCE after a quarter where we had the biggest conversion in our history, and we think it was a very successful conversion. Strong performance with the growth metrics and the returns. The operating leverage came through. I think we moved the efficiency ratio, improved by about 1% during the quarter. This was a really busy quarter: 5,000 new colleagues, 1,400,000 customer accounts, 400+ branch and office locations converting. We did this 235 days after announcement. The team has done a tremendous job delivering on an accelerated basis a really high-quality conversion, putting us in a position now to accelerate the back half of the year and beyond as we run on one suite of systems. We feel very good about where we are. There's opportunity for us in multiple areas to drive further revenue and take the operating expenses out that we committed to. We'll deliver the $435 million.
Thank you.
Thank you. Our next question comes from the line of Manan Gosalia with Morgan Stanley. Please proceed with your question.
Good morning. On the NII guidance for the year: loan growth is coming in better than last quarter and deposit growth is running higher than loan growth. You're clearly pre-funding some loan growth for the second half of the year. You've also released liquidity. Relative to last quarter, what is tracking more negatively that drives you to the low end or below the low end of the NII guide? Is it deposit costs? Is it loan spreads?
Yeah, thanks, Manan. The biggest single change in our outlook around NIM is deposit costs and the pricing environment around that. That's not overly surprising. We're seeing a quite healthy environment of banks now regrowing and getting back to loan growth, which is good for the economy, and that increases need to core fund and some incremental competition on deposits. Further, the interest rate outlook changed materially, from expectations of multiple rate reductions to now potential hikes. The way we think about it is we have multiple levers. We dynamically optimize the business and aim to drive overall revenue and earnings growth. As there's slightly lower NIM trajectory, there's also better loan growth trajectory and better fee growth trajectory, and ways to optimize that. Getting through the Cadence conversion unlocks the opportunity to manage that deposit base in a very nuanced and granular way, which gives us confidence we'll see benefit through the second half of the year.
Manan, as we went through the first and second quarter, we have a large focus on creating outstanding revenue and earnings per share growth. We're also looking closely at return and doing that at the individual deposit and asset class level. One example of spread compression is in the auto business. As a result, we pulled down auto volumes in the first and second quarter because they didn't meet our return threshold. We are optimizing across revenue and expense opportunities and optimizing returns at the business level based on competition on either the asset or deposit side.
Got it. If I think about the jumping off point for 2027: if we do low-teens EPS growth that gets us to about a $1.65 annual run rate. As you think about the bridge between that and the $1.90-$1.93, what would be the two or three biggest drivers that would get you there?
Thanks, Manan. I would point to high single digits or low double-digit overall revenue growth, balanced between spread and fee revenues, with fees continuing to outperform and grow the fastest. On expenses, we're expecting very strong expense management into 2027—between 400 and 500 basis points of positive operating leverage—driven by full run rate cost synergies and baseline re-engineering. Credit continues to be very stable. If that continues and the economy remains resilient, we'll have the opportunity to gradually reduce ACL coverage. Lower share count from repurchases will also help. Those are the building blocks to get to that longer-term target.
Manan, one example looking into 2027 is the springboard we have in Texas. It's one of the fastest-growing economies. Twelve months ago we were not in the top 400 banks in Texas. Today we're top eight. We had no presence in Dallas and Houston; today we're top five. We had no branches; today we have 140 branches. We had only a handful of revenue-producing colleagues there; now we have 955. We had just less than $5 billion in loans; now we have $31 billion and $26 billion in deposits. It's a dynamic, growing market that gives us a massive springboard. We have scale and a model that combines national expertise with local coverage that's appreciated in the market.
Got it. Thank you.
Thank you. Our next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your question.
Hey, thanks. On the fee income guide, can you talk more about your confidence in being at the higher end or above? What's driving that? What's the other side of the revenue guide?
Sure. We're really pleased with fee performance. Organically, value-added fee revenues grew 18% year-over-year in Q1 and accelerated to 30% organic growth in Q2. Underlying drivers include significant investment over time in payments—treasury management, commercial payments, merchant acquiring—which gives us penetration opportunities as commercial banking activity grows. Wealth has been built out across markets and we've knit wealth together with core banking, driving household growth and AUM growth. Capital markets supports our commercial banking activity and we've added capabilities like loan syndication. We also have added bolt-on M&A capabilities that have enhanced growth. All of these are sustainable drivers to grow fees as a percent of revenue and help us outperform this year and into next.
Jon, as we come into this second half, pipelines look really good. We've had a busy quarter with the conversion-related activities while maintaining the effort to grow customer relationships, which you saw in the pipeline and Brant's comments. One question historically has been whether we could keep organic growth intact while moving forward with partnerships; I think we've answered that call and we're positioned well for the second half.
Maybe the growth was a little slower this quarter. Is that fair? Are you satisfied with the 1.2% core loan growth?
Well, it's a bit slower, and about a point of that relates to indirect autos. In the first two quarters, it's probably around $2 billion of lower production than we would typically have because we didn't like the returns. Our emphasis and discipline on returns moderated growth in that category. That typically runs a couple of quarters and then reverts to norm. We also had a fair amount of pre-runoff, a bit more than expected. We've wanted to see some balancing of commercial real estate to about 10%-11% of total and reduced construction commitments—we're seeing that happen faster than expected. Those two small headwinds restrain the overall net growth, but both are temporary and position us better on risk and return over time.
Okay. Thanks. Cheers.
Thank you. Our next question comes from the line of John Pancari with Evercore ISI. Please proceed with your question.
Good morning. On your NII outlook, could you talk about your confidence in this updated guide and that it will not be negatively revised again? What gives you that confidence? Is it the fact that some loan growth was pre-funded? Given deposit pricing competition across the industry, this is a key issue influencing your stock's multiple. Would love to get your confidence on that front. Thank you.
Great question, John. There's a lot of the year left to play out, and we are proven to be dynamic operators. That's what gives us confidence. We have the tools to achieve our objectives. We're growing loan volume and core funding with deposits—deposits grew faster than loans in Q2—which allows us flexibility. We're seeing strong opportunity to optimize in the combined deposit base now that the Cadence conversion is complete. It's not our expectation that the environment will meaningfully change; it will remain competitive, and we have many tools. Brant illustrated our granular pricing capability and other levers. Ultimately the goal is revenue growth, not just NII. We feel very good about the multiple levers and paths to achieve that.
John, it's Stephen. It's about revenue growth and returns translating to earnings and high levels of return. We're at 17.5% ROTCE now with the big conversion behind us. The revenue synergies look really good. We are positioned post-conversion to grow in the coming quarters. We'll navigate modest issues as they emerge, like we did with auto. We're not going to trade off return for volume. We like how we're set up for the second half.
Thank you. Our next question comes from the line of Ken Usdin with Autonomous Research. Please proceed with your question.
Good morning. To hone in on NII: loan and deposit growth in the second half are clear from the guidance. The size of the balance sheet is smaller than people thought in this quarter's average. Can you give as tight a range as you can for where average earning assets (AEA) will be for the Q4 exit that implies that NII? You mentioned that organic deposit growth dollars should outgrow loan growth dollars from here. Is it fair to say that now that you've reset the balance sheet, average earning assets should grow pretty close to what deposit growth grows? Also, can you give a sense of where June 30 spot deposit costs were versus the quarter average and what upward pressure you would see assuming no rate cut?
Part of what you see in average earning assets for the quarter was actions we've taken to optimize liquidity and bring down elevated cash levels; that obfuscated some trends. My point of reference would be to use loan and deposit guidance. My expectation for cash and securities as we exit this quarter is very similar to what we were running last Q4, if you want to use that as a modeling input. The objective is to continue to drive strong loan and deposit growth; my general expectation is in the 2%-3% per quarter growth range. On the relationship between deposit growth and AEA, it's a reasonable assumption that AEA will grow close to deposit growth as we match fund over time. Regarding deposit costs and NIM, I would point you to the NIM guidance: we expect NIM to rise modestly into the low 320s basis points in Q3 and then into the mid to high 320s in Q4. That implies some modest incremental deposit pricing, offset by opportunities to optimize within the combined deposit base, fixed asset repricing, and liquidity optimization. Those are the ingredients to get toward the guidance.
Okay. Sorry, one more. On deposit costs, given there are still some things to work on post-conversion, can you give any sense of where June 30 spot deposit costs were versus the average? And what type of upward pressure you would see assuming no rate cut, just to give a common basis?
I want to be careful not to be overly precise, but to reiterate, our expectation is NIM will modestly rise into the low 320 basis points in Q3 and then into the mid to high 320 basis points in Q4. That includes some modest incremental deposit pricing, but offset by optimization actions, fixed asset repricing, and liquidity management. We'll drive toward those dynamics to achieve our overall revenue objectives.
Thanks.
Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Mr. Steinour for our closing remarks.
Thank you, operator. Over the last several years, we've transformed Huntington into a stronger, more diversified super regional bank. We've expanded into attractive growth markets, broadened our business mix, added new capabilities, and reduced risk through greater geographic and revenue diversification. This has resulted in excellent financial performance, growing tangible book value, and returning substantial capital to shareholders, while our aggregate moderate to low risk appetite has been maintained. We believe the company is very well positioned for continued growth, and the recent partnerships further strengthen that long-term opportunity. I'd like to close with three key points. First, the core franchise is performing at a high level. We're seeing strong momentum in loans, deposits, and our value-added fee businesses with capital markets, wealth, and payments all contributing to durable earnings growth. Second, the integration has progressed very smoothly. Both the core franchise and new regions are performing very well. This gives us confidence in the cost synergy path and the increase of the opportunity to deepen customer relationships across the broader platform. With the Cadence conversion now complete, we're encouraged by growing pipelines and seeing increasing opportunities to convert that activity into revenue synergies as we previously committed. Third, we remain on track to deliver our financial targets. The Path to 2027 is clear: organic revenue growth, disciplined expense management, synergy realization, and strong capital generation. The fourth quarter will provide a clearer view of the earnings power of the go-forward franchise. We've got strong momentum, a clear plan, and a team that executes. I want to thank our colleagues for an exceptional quarter. Thank you all for joining us today.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.