Monday, July 09, 2007

"...it turned out to be far worse than planned" / Huntington Bancshares

Only a regional bank but the comments and details are worth a closer look....And keep in mind that the low loan loss provisions were the main reason for the earnings increase in the past years. I think this trend is facing some serious headwinds and will reverse very soon. Keep that in mind when the media is praising the low pe ratio that is already over the historic average for the financial sector.......

Es ist zwar nur eine Regionalbank, die Kommentare und Details haben es aber in sich.....Zudem sollte man bedenken das gerade die fast nicht vorhandenen Rückstellungen der Hauptgewinntreiber der Banken in den vergangenen Jahren gewesen ist. Ich denke das hier zukünftig mit erheblichen Gegenwind zu rechnen ist und sich der Trend demnächst umkehren wird. Und das zu Zeiten wenn das aktuelle KGV für den Finanzsektor bereits über dem historischen Durchschnitt liegt.

$60 million pre-tax of provision expense, a $31 million ($0.08 per share) increase from the 2007 first quarter, including $25 million ($0.06 per share) related to three large credits including two East Michigan real estate credits and one Northeast Ohio commercial loan. These credits were downgraded from performing to non-performing status. The commercial developer and residential real estate home builder markets in East Michigan deteriorated during the quarter, reflecting a significant downturn in home sales activity and the inability of homebuilders to sustain sufficient sales activity

Commenting on the quarter, Thomas E. Hoaglin, chairman and chief executive officer said, "These results were below our expectations and resulted primarily from difficult and deteriorating residential real estate markets. The Spring and early-Summer selling season is important for homebuilders, and while we had expected softness, in the case of East Michigan, it turned out to be far worse than planned. We believe it important to address this situation aggressively. Our loan loss reserve ratio will be about 1.15% at June 30, 2007, up from 1.08% at March 31, 2007."
Huntington expects to report total non-performing assets of about $262 million, a $55 million, or 26%, increase from the end of the prior quarter. The three commercial loan relationships account for $43 million of the net increase. Provision expense in the quarter will exceed net charge-offs by about $26 million, with net charge-offs expected to total $34 million, or 0.52%, of average total loans and leases. The three commercial loan relationships accounted for $12 million, or 0.18%, of charge-offs in the quarter. For the first half of 2007, net charge-offs are expected to represent 0.40% of average total loans and leases.

Commenting on credit quality trends, exclusive of any impact from the Sky Financial acquisition, Hoaglin said, "We expect full-year 2007 net charge-offs will be in the mid- to upper-half of our targeted 0.35%-0.45% range, with commercial net charge-offs remaining under pressure, but consumer portfolio net charge-offs remaining generally stable. We expect moderate increases in our loan loss reserve ratio over the second half of the year."

Huntington Bancshares Incorporated is a $50+ billion regional bank holding company headquartered in Columbus, Ohio. Huntington has more than 141 years of serving the financial needs of its customers. Huntington's banking subsidiaries, The Huntington National Bank and Sky Bank, provide innovative retail and commercial financial products and services through over 700 regional banking offices in Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia ($ 5.34 billion market cap)

Disclosure: Short KBW Mortgage Finance Index
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1 Comments:

Blogger jmf said...

Stock closed down (only) 3,5 percent.

12:27 AM  

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