Huntington Bancshares Incorporated ($HBAN)

Thank you for being here. I'm pleased to have Huntington here. We have -- Brant is going to start with some opening comments. Zach will come in and follow up with a few others, and then we'll do some Q&A. Brant, thank you for being here.

Okay. Well, thank you very much, and good morning to everyone. And Jon, thank you and RBC for hosting us today. We very much appreciate it. As Jon mentioned, I'm Brant Standridge, the President of the Consumer and Regional Bank here at Huntington, and I'm joined by my colleague, Zach Wasserman, who is our CFO. And our goal today is to share a brief update on our model and the progress we're making on the partnership integrations and then hand it over to Zach. After prepared remarks, Jon is going to lead us in Q&A. So before we begin, if I could direct you to Slide 2 regarding forward-looking statements. So let's begin on Slide 3. We entered 2026 with strong momentum. Our model is working, delivering robust revenue, earnings and tangible book value growth and producing top-tier returns. And with the Veritex and Cadence partnerships now successfully closed, we've added the capacity to further springboard that momentum as we move forward. There are 4 key messages Zach and I want to leave you with today. First, we've built a highly differentiated super regional bank model with multiple engines for growth. And we believe that to be differentiated. Second, our focused execution is translating into powerful organic growth across the franchise. We're growing relationships, expanding wallet share and consistently delivering results across every major line of business. Third, we have a disciplined approach to integrating new partners. Our playbook drives both cost and revenue synergies and we execute in a way that preserves what matters most, supporting our customers and bringing new colleagues into our culture with care. Fourth, our model is delivering outstanding earnings growth, which will support substantial capital return and tangible book value expansion over the near, medium and long term. When you bring those elements together, you create a flywheel of powerful value creation. Disciplined execution drives results, results increase our capacity to invest in talent, capabilities and markets and that reinvestment strengthens the franchise and accelerates growth again. That's the engine behind our value creation story. And frankly, we're still in the early innings. Slide 5 is a double-click into our commercial bank. Over the past few years, we've built one of the most dynamic and fastest-growing commercial banks in the country. At year-end, inclusive of Veritex and before the close of our partnership with Cadence, we serve customers nationally with meaningful scale at roughly $70 billion in loans and $51 billion in deposits. Our model is centered on advice, guidance and deep expertise. We have 17 unique verticals holistically serving distinct industries with specialized banking services. And our commercial banking is supported by an expansive set of value-added capabilities, including capital markets and payments. This combination of national scale, specialized knowledge and value-added capabilities allows us to serve a customer set that ranges from private middle market companies to large corporates. Our bankers operate in market, know their clients and provide award-winning service that builds durable high-quality relationships. Slide 6 is a similar look into our consumer and regional bank. The key distinguishing feature of this segment is our differentiated local delivery model. We bring the full breadth, scope and national scale of our commercial capabilities, including our 17 unique verticals to our local markets through in-market teams serving consumer small business and middle-market customers. Our model operates with local leadership and our leaders have accountability to integrate the entire Huntington franchise. We have 21 regional presidents across our footprint, each with decision-making authority and full P&L responsibility. This structure brings the entire Huntington platform to customers through local bankers who know their markets and are empowered to act. Our bankers are in the market, lead with advice and are expected to align the whole bank to support the local customers' goals. When you combine this model with strong digital capabilities and disciplined risk management, it drives consistent high growth. Now turning to Slide 7. Driven by the approach that I've just described on the last 2 slides, our core business continues to perform exceptionally well. Excluding the impact of closing the Cadence partnership last month, our core delivered $1.2 billion of loan growth and $1.3 billion of deposit growth. Both of these metrics put us on a track to achieve our stand-alone 2026 guidance of 11% to 12% loan growth and 8% to 9% deposit growth. Our momentum is broad-based across customer segments, products and geographies. Regional banking, middle market banking and our specialty lending verticals and asset finance have all been strong contributors so far this quarter, with Texas leading our expansion geographies. On the funding side, deposit gathering remains strong, driven by continued gains in primary relationships in both the business and consumer segments. Our pipelines are healthy across consumer and commercial lending, providing good visibility into the next several months of growth and reinforcing our confidence in our 2026 outlook. In summary, our core momentum continues to be driven by consistent customer acquisition, deeper relationships and disciplined execution across products, regions and customer segments, exactly what our model is designed to deliver. Turning to Slide 8. Our ability to integrate partner organizations is a core differentiator for Huntington and the past year shows how effectively our playbook works. Let's start with Veritex. The integration is complete. It was efficient and well executed, moving from announcement to systems migration in 187 days. We're on track to achieve the identified cost synergies with the full run rate in place by the second quarter. Early customer and colleague engagement is already driving revenue synergies. Turning to Cadence, we expect a similar outcome. Talent decisions were completed early, creating clarity for our new colleagues and enabling us to retain the highest performing bankers. In fact, retention has been tracking at the top end of our expectations. Additionally, systems integration planning is progressing as expected, giving us clear line of sight into cost synergy capture. These 2 partnerships expand our reach, add scale to our model and springboard our growth trajectory across highly attractive markets. Slide 9 outlines how our partnerships translate into real earnings power and investment capacity. As we noted last month, these 2 partnerships are expected to deliver $435 million of cost synergies at full annual run rate. Veritex will reach its $70 million annual run rate by next quarter and Cadence is on track to deliver its $365 million run rate in the fourth quarter. These synergies are projected to reduce 2026 operating expenses by approximately $340 million with an additional $100 million of benefit in 2027. This expansion in earnings power directly increases our capacity to reinvest in the growth initiatives that drive our outperformance. In summary, disciplined execution drives durable savings and supports earnings momentum, which strengthens our ability to invest and compound performance across the franchise. Slide 10 details how these partnerships translate into sustainable revenue growth. We see 4 primary categories of revenue synergies, and we are already seeing early traction. First, we're bringing the full Huntington platform into our partnership markets. We're seeing early momentum around this. For example, some Cadence customers are already taking advantage of our greater lending capacity, reflecting the strength of our balance sheet and the breadth of our capabilities. We're also generating incremental fee revenue in value-added services from the Cadence customer base in areas like merchant acquiring, capital markets, our dealer floor plan business, equipment finance and wealth management. In Texas, this momentum is accelerating as our presence has significantly expanded, enabling us to win more. A clear example is our auto business. A number of Cadence customers had long-standing banking relationships, but frankly, didn't have access to a full suite of auto-oriented products, including our floor plan. As we introduce that capability in those capabilities, where Huntington, as you all know, has deep expertise. We're seeing strong traction with the auto dealers we already bank. More resources in the market allows our team to compete more effectively, widen the funnel and drive deeper deposit and product penetration. We're also beginning to deepen Cadence's customer relationships and early evidence is encouraging, including deposit growth across Cadence markets, all of this expansion is supported by our marketing and digital acquisition capabilities, which we believe to be industry-leading. In Texas, we have density and priority in the largest markets. And we're using our marketing and digital acquisition engine to widen the top of the funnel and improve conversion. We also intend to continue investing to drive growth into the future. We're doing this in the form of technology and product development. We're adding bankers with specialized capabilities. And over time, we will be increasing our branch density in select markets and cities in the cadence footprint just as we're doing in the Carolinas. These type of investments create durable enterprise-wide revenue expansion. As you can see, we've identified several categories where Huntington can enhance performance across both franchises. We expect cumulative revenue synergies to exceed $500 million over the next 3 years, reaching $300 million in 2028 and continuing to grow from there. Putting it all together, execution across our core franchise remains focused. Momentum is accelerating in our new partnership markets, and we have clear line of sight to both the expense savings and revenue synergies. These are the key drivers to accelerate our flywheel of value creation. With that, I'll turn it over to Zach to cover the financial outlook.

Thank you, Brant, and good morning, everybody. It's great to be with you. Turning to Slide 11. As Brant just discussed, the core franchise continues to perform very well. On a stand-alone basis, excluding cadence, first quarter net interest income is tracking within our stand-alone guidance range of 10% to 13%. In terms of fees, notwithstanding that the first quarter tends to be the seasonally lowest nominal dollar amount of the year core performance, excluding Cadence, is tracking to the 13% to 16% annual growth guidance, reflecting broad-based momentum across payments, wealth and capital markets. Lastly, core expenses, excluding Cadence, which are seasonally higher in the first quarter, remained in line with our expectation of 10% to 11% growth for the full year. Importantly, we expect revenue growth to significantly outpace expense growth throughout the year. As a result, we remain confident in our ability to deliver 150 to 200 basis points of core operating leverage and 500 to 600 basis points of total operating leverage in 2026, reflecting both the operating expense discipline embedded in the base and the incremental contribution from cost synergies from Cadence. As we expect -- and we expect to exit the fourth quarter of 2026 with an efficiency ratio below 55%. When we include Cadence, the earnings profile of the combined company becomes even more powerful. For the full year, Cadence is expected to contribute approximately $1.8 billion of net interest income, $300 million of fee revenue and approximately $1.1 billion of operating expenses. The performance we're delivering continues to reflect our fundamental operating principles. Execution remains rigorous and focused core revenue growth is robust, and we maintain strict adherence to our aggregate moderate to low risk appetite. We have a clear line of sight to sustain growth expanding earnings power and meaningful operating leverage in 2026 and 2027, supporting our path to our 2027 EPS target of $1.90 to $1.93. As we noted last month, one element contributing to our confidence in the 2027 earnings outlook is our share repurchase program. Based on the strength of our earnings trajectory and capital generation, I'm excited to announce that we've decided to both accelerate and upsize our share repurchase activity for 2026. Let me expand on that on the following slide. Slide 12 captures how all the dynamics we've just covered, our strong core performance, our ability to capture cost synergies and our investment in revenue synergies translates into meaningful shareholder value creation. First, the earnings trajectory is extraordinarily strong. Our 2027 earnings per share target represents more than 30% growth from the earnings we delivered in 2025, driven by sustained organic growth across loans, deposits and fee businesses combined with expanding operating leverage and disciplined credit management. This reflects the combined momentum of the core franchise and the incremental contribution from Cadence. Second, that earnings growth drives higher returns and improved efficiency. We expect to expand our ROTCE to 18% to 19%, putting us in the top tier of the peer group. As a result, we expect internal capital generation to support high single-digit to low double-digit tangible book value per share growth through 2027 and beyond while maintaining an attractive dividend payout. Third, we remain focused on returning capital to shareholders as capital generation continues to accelerate, we expect to increase capital return through share repurchases. To date, we've repurchased $150 million of shares just in the last couple of weeks and we now expect to return approximately $550 million of repurchases in 2026, well above our initial expectation for this year that we set earlier of $200 million. The increase in share repurchase capacity is driven by the fact that our book value dilution at close of the Cadence transaction was substantially better than our initial expectation. For 2027, we expect to receive a new share repurchase authorization to expand our existing $1 billion program and increased repurchases to between $1.1 billion and $1.2 billion. This will bring total planned repurchases for the 2 years to about $1.7 billion. This would represent retiring approximately 2% of shares in 2026 and roughly 4.5% to 5% cumulatively by the end of 2027. These repurchases will contribute to our earnings per share growth and support our confidence in the $1.90 to $1.93 target for 2027 without impeding our ability to allocate capital toward our top priority funding high-return organic growth. Taken together, these dynamics reflect the strength of our earnings power, improving return profile and which fuels meaningful internal capital generation. In turn, that accretes tangible book value growth, supports our dividend yield and enables increasing total shareholder return over time. Turning to Slide 13. I'll close by bringing this all together. Our model is working across the franchise and the momentum we're delivering reinforces our confidence in the durability of our revenue and earnings growth. As performance compounds, our capacity to reinvest expands and that reinvestment strengthens the competitive differentiation and market opportunities, which power long-term growth. We're executing against the plan, integrating partners with discipline and reengineering the cost base to further expand investment capacity and support operating leverage. The outcomes we've shared today are direct outputs of this model. We're delivering peer earnings growth, peer-leading earnings growth, returning capital to shareholders and generating strong value creation. With that, I'll turn it over to Jon for Q&A.

Right. Thank you, Zach. Brant, let's start with you in your comments. You talked about strong core franchise performance and growth. The integration work is obviously ramping up. What gives you confidence your team can continue that pace of organic growth without being disrupted?

Well, first of all, we view the partnerships as a springboard for growth, not a substitute for it. And so there is a significant amount of focus inside of the company on ensuring that we're organically growing. We're proving that in the results. If you look at the results that the team provided in this presentation, you'll see that we had very, very strong growth quarter in fourth quarter, and we're off to a very strong start to this year as well. So the results would indicate that. As it relates to the integrations, we have dedicated teams that are assigned to doing that. That way, our frontline colleagues that are engaged, frankly, with either Cadence or Veritex or our frontline colleagues in the core of the organization aren't really focused on the integrations. They're focused on delivering for their customers every day. The growth levers that we have in the company are widespread. So we have a number of different places that we can continue to grow and invest. And then the core continues to perform well. Fundamentally, what's driving our core and many of these new investments is the model that we described, which is working. It was in Texas at the end of last week and had an opportunity to meet a brand-new customer who had just joined us. And it was a relationship that started with a trust relationship. It's now a wealth relationship, now a full middle market banking relationship. And in talking to that customer, why did you choose Huntington is really the model. One, you could bring all the product specialties and the capabilities to the table, but you did it in an integrated way with people locally that I know. And so the model fundamentally across the board is working.

Okay. On that topic of being in Texas, can you talk a little bit about attrition? You mentioned it in your comments, but it obviously is something that people are talking about.

Well, listen, any time there's disruption in the market, you want to take advantage of that, and we've absolutely done that ourselves. That's something that we plan for, and it starts with really our approach, which is about partnership. Both Malcolm and Dan will be engaged with Huntington for a very long time into the future. And their leadership and connection is really important to us and also to the teams that are engaged. We also started early in the talent planning process. And in fact, in both organizations, we had mapped the organization and the key leaders before announcement. In the case of Cadence, which was larger, the top 100 or approximate leaders were all determined before closing. In fact -- I mean, for announcement, in fact, we spoke to a number of them before announcement. And then we announced October 27, but by December 15, all 6,500 colleagues knew their status with the company. We think that certainty, frankly, takes out a lot of the challenge that you might have during a period like that. It's also good for the customers because you can say to the customers person that you've known and worked with for a long time is going to be there. To just give you some statistics, we had 1,000 revenue producers that we identified that we offered retention to. I will tell you that retention included, obviously, protected covenants for us. We had 5 people that didn't accept the retention package. And out of the 6,500 cadence colleagues we have had 66 people turnover since announcement. And of the 66 folks, half of that, you would say, is regretted attrition because we did have some teams that we didn't have capacity for that thankfully have been able to find homes in other places. But overall, it's going very, very well, and it is our intention that we care for the people first and that leads to a more stable experience as time goes on.

Okay. And then just one more on the market competition. We've had another bunch of Texas and Southeastern banks up here talking about increased competition. What are you seeing in those markets?

Well, I mean, our markets have been competitive for some period of time, and these markets are competitive as well. We feel very strong about our 2026 guidance from a deposit and loan growth perspective, as I said earlier, and our start to the year would indicate that, that is still the case. I would share with you from a deposit perspective, it is intense, but it's -- but I don't view it as irrational. And if you look at the core of our deposit growth specifically, it's really 2 things I would point to. Number one, we've been focused for many years on growing the number of primary bank relationships we have for both consumer and business, and we see leading growth rates in both of those. That is core to our deposit growth. And then we've also, over time, developed a lot of capability in how we managed the deposit portfolio. We have a very granular analytical view of pricing across our 20 now 2-state footprint. We also have a granular view of all the pricing and the back book of our deposit portfolio and understand the sensitivities of those customers. And so that analytical rigorous focus on managing the portfolio and combined with a focus on generating new households has led to very strong deposit growth, and we believe we can be very, very successful in these new markets as well.

So nothing you can't handle.

That's right.

Okay. Zach. Thanks for the buyback update. It's pretty comprehensive, $150 million quarter-to-date. Another $400 million for the rest of the year, $1.1 billion, $1.2 billion next year. What's driving that level of activity? I think you talked about $0.03 to $0.04 contribution in the bridge to 2027. Talk about why that level of activity and what's driving it.

Yes. We're really, really pleased, as I said, to be able to have started that program now officially. We've talked for some time that given the strength of the earnings profile, given the capital strength of the firm that we had anticipated to begin this program as soon as we completed the close of Cadence, and that's exactly what we've done. And in fact, as I noted in my prepared remarks, the cadence partnership came through finally on legal day 1 with a lower level of book value dilution, it was about $350 million less. We put every dollar of that into the share repurchase program, and we're pleased to have done that. So cumulatively, it's going to be, as I said, about 5 percentage points of the stock already. It's just under 0.5 point of the stock has been retired just in the last -- in the last month. So really, really pleased with that. And all of that, though, with our top priority is to grow high return organic loan growth. And as we noted, not only growing already this year, but a lot of confidence we're going to keep that going through 2026 and with strong line of sight that, that will continue beyond that, particularly driven by revenue synergies.

Okay. Good. And on the topic of synergies, talk to us a little bit briefly, I guess, about how you expect the synergies to flow through in '26 and '27 kind of the timing and magnitude.

Sure. I'll take that one. In terms of -- so as Brant noted, I think the integration process is well underway. The decisions and planning necessary to achieve the cost synergies have all been completed, and now we're just in the process of executing those activities and seeing the realized through Veritex's cost synergies fully in the run rate by Q2, Cadence fully in the run rate by Q4. That should be a very meaningful lift for efficiency. We expect to exit this year in Q4, as I mentioned, below 55% efficiency and further drive that down into 2027 with another $100 million on a full year basis being realized in terms of cost synergies in FY '27. From a revenue synergy perspective, expecting to between $50 million and $75 million this year, which will help us self-fund the investments to drive further expansion of that revenue synergy program growing to $150 million in revenues in '27, $300 million of additional revenue synergies in 2028, all with increasing profitability across that time.

Okay. Good. And then you touched on the full year guidance and your comfort in the range on the full year. Anything you want to touch on what you're seeing so far quarter-to-date in the first quarter?

Q1 looks really good. We came into the year with a lot of momentum. Loan pipelines look very strong. There was obvious opportunities to continue to drive deposit volumes and costs expected to see net interest margins expand and net interest revenues continue to grow. And so everything we're seeing in the first quarter continues to track to our full year guidance. Credit looks terrific. Obviously, we're watching very carefully the current market volatility. But as of now, we're not seeing any impact on our business. And our customers look quite resilient.

Brant, are you seeing anything from a customer point of view?

I would echo what Zach just described, we're not seeing that at this point. I mean our commercial customers, for example, have had a number of kind of external shocks, so to speak, starting with tariffs a year ago. And so they've learned to adjust and they seem to be doing so in the environment that we're in now, and we're obviously watching it very closely. On the consumer front, there were some impacts to consumers and volumes in some of our consumer businesses because of weather in January, but we're not seeing anything that would alarm us at this point. But with the world today. We're watching it closely.

Okay. Just in the final minute, maybe for either you, maybe start with you Zach, if you'd like. But it's been bumpy for the last month or so. And when you step back and you think about some of the market reaction, how do you articulate the Huntington investment thesis? I think you would say it's an overreaction, and you may be -- you're trying to put a bottom in here, but how would you articulate the thesis?

Fundamentally, the model that we are running, we believe, generate significant value. We're a highly differentiated super regional bank. We have multiple growth levers for long-term sustainable earnings growth and revenue growth at a top-tier return. And all of that accretes to growing tangible book value, growing capital return for shareholders. Just look at what the information we shared today represents 30% growth in earnings, a top-tier return, which continues to expand and 5% of the shares bought back of the company on top of a really attractive dividend yield. So what we -- our role is to drive that performance, and we believe very strongly we're going to achieve it.

I can't add a lot to that. I would simply say the investments that we've made, the enhancements that we've made to our model, the performance that we are delivering to the market we believe, is good for investors today and good for investors for the long term, and we believe over time, our stock will reflect that.

Yes. Okay. We're out of time, but thank you guys for being here.

Pleasure to be here too.