Huntington Bancshares Trading Near Book Value Is A Bargain

Sep. 2.11 | About: Huntington Bancshares (HBAN)

I have yet to recommend a bank stock in the wake of 2008's financial crisis. The balance sheets are just too opaque to trust. Recently however, Huntington Bancshares (NASDAQ:HBAN) got my attention. Huntington is a regional bank holding company with 611 branches in six states. The company services individuals and small businesses through its retail and business banking unit, corporate clients through its commercial banking unit and automobile dealers and real estate developers through its automobile and commercial real estate division. The bank also provides home loans and investment services to clients.
Shares of Huntington traded down more than 3.5% Thursday to close at $4.84. The stock hit a 52-week low of $4.47 on August 23 and has performed dismally of late despite the fact that the company has beaten analysts' earnings expectations for four straight quarters. At current levels the shares are changing hands at just 7.8 times 2011 estimated EPS; this compares to an average price-to-forward-earnings ratio of around 11 for regional banks as a group.
The company's allowance for loan losses is above that of its peers and its percentage of non-performing loans to total loans is well below the industry average (source: S&P Stock Report). HBAN trades very near its tangible book value of 4.57 and the stock yields 3.2%, higher than competitors KeyCorp (NYSE:KEY) and Fifth Third (NASDAQ:FITB). Additionally, HBAN's percentage of long-term debt to capital is less than KeyCorp and Fifth Third.
Four insiders bought shares last month, including CFO Donald Kimble and CEO Stephen Steinour, who bought 58,370 shares in August. 60% of analysts who cover the bank rate it a buy/hold or better and applying the industry average p/e ratio of 11 to analysts' estimates of 2011 earnings puts the stock at $6.82, a 42% premium to yesterday's closing price. The bank will report earnings again on October 17. I expect the company to beat expectations again. Now may be an opportune time to buy the shares on Thursday's dip.

Disclosure: I am long HBAN.