My Original Investment Theses
When I originally wrote about Columbus, Ohio-based Huntington Bancshares (NASDAQ:HBAN), I did so with a rather positive bias, my original title of A 6.5% Yield With A Sizable 25% Upside Potential really under-punched its potential. At the time of me currently drafting this article, the stock has produced a total return of more than 40% since the time the original article was published.
My original thesis could be boiled down to just a couple of sentences. When looking back, the most conscious takeaway would be:
While the current reserve level is a little better than regional peers, I do find the historically low level of nonperforming assets and charge-offs reassuring to the credit profile (relative to other consumer oriented lenders). Putting this all together, I believe HBAN has a better lending profile than other regional peers, coupled with a stronger reserve level to help insulate the bank from any potential future loan problems.
That being said, while I was a little disappointed to see TCF Financial (TCF) to have grown criticized loans notably in the past year, I did note the positives in the bank. One of the things I hoped readers took away from my latest TCF article:
Prior to the combination of TCF and Chemical Bank, I thought of them both as being "better than average". That said, I think the current near-term outlook for this new and improved TCF Bank is only average relative to peer banks (thus my neutral stance). The bank is still integrating from its merger of equals, and the profitability outlook only appears better than average due to looming expense reductions (rather than revenue growth).
New Investment Thesis
When these two banks do eventually come together and operate as one entity, I get rather excited about the prospects of Huntington
