Huntington Bancshares Incorporated (HBAN)

How it makes money

Most revenue is net interest income: the gap between interest earned on loans and securities and interest paid on deposits and borrowings, which moves with both loan growth and the level of interest rates. A smaller, steadier stream of noninterest income comes from fees — payments and cash management, wealth and asset management, deposit and loan service charges, and capital-markets advisory work for business customers. The bank reports through two segments, Consumer & Regional Banking and Commercial Banking, covering retail and business customers respectively.

A checking account, direct deposits, autopay and a mortgage tied to one bank create real friction to moving elsewhere, and Huntington's dense branch network in its core Midwest markets reinforces local relationships. The advantage is narrow: banking products are largely commoditized, digital-only competitors offer better rates with none of that friction, and business borrowers routinely shop multiple banks for credit.

Loan demand and credit quality track the broader economy and, given Huntington's Midwest concentration, the health of that regional economy specifically: businesses borrow less and defaults rise when growth slows. Profitability is also sensitive to interest rates set by the Federal Reserve, since the spread the bank earns between loan and deposit rates widens or narrows as rates move.

Key risks

• Interest rate sensitivity — Changes in interest rates can reduce net interest income, reduce transactional income, and negatively affect the value of loans, securities and other assets, with a direct impact on results and capital.
• Credit quality and loan losses — The bank's allowance for credit losses may prove inadequate if the economy or a borrower's specific circumstances deteriorate, which could significantly affect net income and capital.
• Geographic concentration in the Midwest — Customers with loan and deposit balances are located predominantly in Ohio, Michigan, West Virginia, Indiana and Kentucky, so adverse economic conditions in those states would be felt more sharply than at a more geographically diversified bank.