DBRS Places Huntington Bancshares Inc’s Ratings Under Review with Negative Implications

DBRS has today placed the long- and short-term ratings of Huntington Bancshares Inc. (Huntington or the Company) and its related entities, including Huntington’s Issuer & Senior Debt rating of BBB (high), Under Review with Negative Implications.

The review will focus on Huntington ability to cope with the continued asset deterioration. Over the past year Huntington has struggled with elevated credit costs and earnings erosion associated with both the Company’s non-core Franklin Credit Management (Franklin) relationship and core loan portfolios, particularly those related to the commercial real estate and commercial & industrial loan lending. Additionally, the Company’s recent performance has been negatively impacted by a narrowing net interest margin (NIM), and recurrent other-than-temporary-impairment (OTTI) charges related to its asset backed securities portfolio.

Positively, Huntington has restructured its Franklin exposure, which gives it greater flexibility in working through this troubled exposure. Furthermore, DBRS notes the Company’s improvement of its tangible common equity ratio to 4.65%, its proactive approach to managing its non-interest expenses and its strengthening of its liquidity position.

Besides the likely credit costs associated with the Franklin related exposure, DBRS perceives that significant amounts of potential losses likely remain embedded in Huntington’s core portfolios. While loan loss reserves have been built up in recent quarters, coverage may still be insufficient to address potential losses. Furthermore, the extremely difficult operating environment and weakness in the economies in Huntington’s franchise is likely to continue to constrain revenue growth and pressure expenses, limiting improvement in core earnings.

DBRS’s review will focus on Huntington’s asset quality, financial performance and franchise value. In addition, the review will also consider the Company’s plans to manage reserves and preserve capital, as well as prospective financial performance in the near term.

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

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.