Huntington Bancshares (HBAN) revised its 2027 adjusted earnings per share target downward to a range of $1.75 to $1.83, a significant reduction from its previous guidance of $1.90 to $1.93. The announcement, made during the Barclays Global Financial Services Conference on September 16, sent shares tumbling 5.55% to close at $15.82, with approximately 77.5 million shares changing hands.
The revised outlook reflects management's more cautious stance on loan growth and the pressure on net interest margins from rising deposit costs. The midpoint of the new guidance stands at $1.79, down 6.5% from the prior midpoint of $1.915. Additionally, the bank trimmed its implied 2026 revenue growth forecast to roughly 34% from about 37%, according to MT Newswires.
Why Higher Rates Didn't Help
While a higher federal funds rate typically boosts yields on floating-rate loans, it also increases the cost of deposits. After the Federal Reserve's recent rate hike, Huntington raised its prime rate from 6.75% to 7.00%. However, the benefit of this repricing is limited unless asset yields outpace funding costs and loan demand remains robust.
The tension was already evident in the second quarter. The fully taxable-equivalent net interest margin stood at 3.21%, up 10 basis points year-over-year but down three basis points from the first quarter. Meanwhile, the rate paid on interest-bearing deposits climbed eight basis points sequentially to 2.29%. Net interest income rose 40% year-over-year to $2.05 billion, but much of that growth was fueled by the Cadence and Veritex acquisitions, which expanded average earning assets and interest-bearing liabilities by 35% each.
Acquisition-Driven Growth vs. Organic Momentum
Acquisitions can inflate total net interest income even when the underlying economics are less favorable. Management's revised 2027 guidance signals that the expected benefits from loan volume and margin expansion are now smaller than previously anticipated. This suggests that organic growth may be slowing, and the bank may be relying more heavily on acquired assets to drive results.
At Wednesday's close, HBAN traded at roughly 8.8 times the midpoint of the new 2027 EPS estimate. That multiple appears low, but investors are applying it to a figure that has just been cut. If earnings land at the bottom of the range, the multiple rises to about 9.0 times; at the top, it falls to 8.6 times. These calculations are based on management's non-GAAP target and the September 16 closing price, not a guarantee of future performance.
Counterpoints and Key Metrics
Despite the downward revision, there are positive signs. In the second quarter, Huntington earned $727 million, or $0.33 per share, despite $152 million in pretax acquisition-related costs. Adjusted EPS was $0.39, and average loans and deposits each grew 9% sequentially. If integration costs subside and the new prime rate reprices loans faster than deposits, the bank could still rebuild operating leverage.
The next critical test will be the third-quarter results, particularly loan growth, net interest margin, and the cost of interest-bearing deposits. A stable or expanding margin alongside organic loan growth would support the low earnings multiple. Conversely, another sequential decline in margin would suggest that the 2027 cut is not a one-time recalibration but the beginning of a more prolonged erosion in profitability.
Investors will be watching closely to see if Huntington can navigate the challenging deposit pricing environment while maintaining loan growth. The bank's ability to manage these pressures will be key to restoring confidence in its earnings trajectory.
