ICYMI: Huntington Banking on Texas

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1:54Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, Huntington Bank shares stocked down about 1.8 % as we speak. The company reported second quarter earnings this morning. It boosted its net interest income growth forecast for the full year. Earlier this week, though, the company also agreed to buy Veritex Holdings for$1.9 billion in stock that expands its presence in Dallas, Fort Worth, and Houston. Back with us is Zach Wasserman, Chief Financial Officer of Huntington Bank Shares. It's the holding company of the consumer and business regional bank, Huntington National Bank.

2:35It's got locations in a handful of states, including Ohio, Minnesota, North and South Carolina, and more. Also with us, Bloomberg News Senior Editor Nina Tretman. She writes the Bloomberg CFO Briefing newsletter, which you should sign up for at Bloomberg.com slash CFO dash briefing. Zach is in Columbus. Nina here in our Bloomberg studio. Zach, I want to start just with the deal for Veritex in Texas that will accelerate your operations in the state. What attracted you to this bank in particular and to the Texas market?

3:05Zach Wasserman:You know, we're extraordinarily pleased with the opportunity to partner with Veritex. And, you know, a couple of things I would say. One is the Texas market in particular is incredibly attractive. As you probably know, it's one of the fastest growing states in the country. It's the eighth largest economy in the world, if it was a standalone country. And just the dynamism and the amount of business activity there is incredibly attractive. It's one of the reasons why we launched our own business there more than a decade ago, and we doubled down with a local expansion in early 2024. But Veritex also is an incredible platform for us to partner with.

3:41Zach Wasserman:They're a top 10 commercial bank in the state and in particular focused on the two cities, as you noted before, the two MSA areas, Dallas-Fort Worth on one hand and then Houston on the other hand that we really are focused on. So we not only see a great opportunity to combine our activities, but to really build on that. One of the things we've talked a lot about is that this is a springboard for us to grow organically, not only now in the short term, but really over the longer term in Texas. It'll make Texas our third largest state, to give you a sense. So we already will have a very meaningful presence in that really great market.

4:16Zach, can you talk to us a little bit about how that deal came together? We know, of course, many companies have been looking at dealmaking this year. Dealmaking is actually up compared to the prior year period. But still, of course, there are deals that are not going through because of tariffs and uncertainty. And how far did that impact your deal? And also, how did it come together? Yeah.

4:35Zach Wasserman:Well, you know, so we have wanted to expand and sort of continue to grow into Texas for some time. And we've been, therefore, evaluating a lot of opportunities to do that, both organically. You know, as you probably know, in North and South Carolina, we've just announced a pretty significant organic expansion, building 55 branches and really doubling down, building out our whole franchise there. And so we were looking at opportunities to do the same thing in Texas and obviously evaluating lots of different ways to do that when we really began to talk with Veritex. And it came together pretty quickly.

5:08Zach Wasserman:The first time we met with them to discuss a partnership in any specificity was in mid-June, so just about a month ago. and it evolved quickly for us to see, wow, these are not only incredibly strategic opportunities, but the organizations themselves share a tremendous affinity in terms of culture and mission, which, as you probably know, that is the sort of secret sauce to make an acquisition in banking successful. The cultures need to be aligned. The teams need to work together. And we saw that there was not only the strategic opportunity, but the cultures fit, fit. And then we were able to work together to find some of these growth opportunities that we could capture together.

5:48Zach Wasserman:We said, wow, this is a partnership that we really should move forward with. And so on Monday, we were really pleased to be able to announce that. Just turning to your earnings, talk to us a bit about the past quarter. We spoke to you at the end of the last quarter, and we're asking you, do you see any signs of a recession in your business? How is your business doing? What are you hearing from clients now that we're three months later? How does that look? Yeah. Q2 results were just phenomenal. And they really built strength throughout the quarter. To give you a sense, loans sequentially grew just under 2%.

6:23Zach Wasserman:That's 8 % year over year. That was at the high end of our guidance range that we had given earlier in the quarter. Deposits grew 1%. Fees were up 7 % year on year. Spread revenue 12%. Ultimately, we saw pre-tax earnings up 16 % and earnings per share growing 25 % year on year. So it really was a bang up quarter. I will tell you, if you rewind the tape and you go back to April, I would have told you we had a lot of momentum. We felt pretty confident about how things would go. But there was clearly quite a bit of uncertainty in the market. And the capital markets were pretty volatile. You know, fast forward to June and we saw strength build throughout the quarter.

7:03Zach Wasserman:Loan and customer activity really firmed up, particularly in mid-May and into June. And now the third quarter is starting out with a bang. We just talked this morning with our analyst and investor community, and we shared that, you know, through the first couple of weeks here in July, it's pretty strong, actually. So all signs are pointing toward continued growth and certainly a very encouraging end of what was to start with a somewhat uncertain environment. Zach, Shinali Bassic here. Thanks for joining us today. You know, even with a lot of promising information coming out of this earnings season for the biggest banks, for the regional banks, there seems to have been a pretty muted investor reception for firms even like yours that have boosted net interest income guidance.

7:50That should be a really good thing. What are investors telling you in terms of what else they want to see, why the muted reaction, even if things are looking pretty good?

8:01Zach Wasserman:You know, it's hard to know what's on the mind of investors any given time, as I'm sure you know well. Look, I think if you take a step back, the regional bank stocks have expanded a fair amount over the last month. So I think there's part of that sort of profit-taking activity going on now as results come through. There's also obviously worries around how will different banks fare under this fairly wide cone of uncertainty around where interest rates are going to go from here. Are rates going to stay flat? And could they even go higher or could they go lower? I'll tell you, for Huntington's sake, we have positioned the business to be pretty neutral and to effectively have the same outcome if we have zero rate cuts or if we have as many as four rate cuts from here.

8:45Zach Wasserman:And so I think that's one of the questions on the mind of analysts. I think another one is as loan growth in the banking industry generally starts to pick up, which, by the way, is an incredibly healthy sign. But as it happens across the industry broadly, what will that do to deposit cost competition and the kind of the benefits of interest rates coming down by around a percentage point relative to the peak of Fed funds over the last number of quarters here? So I suspect those and many other things are on the mind of analysts. For our part, I'll tell you, we put our heads down and we run the business.

9:21Zach Wasserman:And I think, you know, what we believe pretty strongly is that we can keep posting that, you know, teens to higher earnings per share growth and revenue growth in the high single digits that ultimately we'll see the stock prices continue to expand as they have been for the last several months. Zach, you talked about interest rates, which of course is a nice segue to our next question. We've seen increasingly intense debate this week and in recent weeks about the future of Mr. Powell as head of the Fed with the Trump administration asking for rate cuts, wanting to remove him. We saw this big excitement earlier this week when the New York Times reported that Trump had written a letter and waved that in front of people in Congress.

10:04I'm just wondering, for you as a regional bank CFO, I know that your peers on Wall Street have expressed their support for an independent Fed earlier this week when they reported earnings. For you as a regional bank CFO, how does that look?

10:19Zach Wasserman:You know, what we want is a well-functioning monetary system. We want a predictable and stable environment. We want to understand that it's a fact-based and, you know, based on the kind of fundamentals of the economy in terms of how the decision-making is happening. So far, that appears to be happening. I personally give the Fed a lot of credit. It was a very difficult environment they've been through, and they seem to have managed through over the last several years pretty well here. And, you know, that'll be where our focus is fundamentally coming back. You know, we run the business every day.

10:53Zach Wasserman:We take the interest rate as given and we try to optimize around that, Nina. We're speaking with Zach Wasserman, Chief Financial Officer of Huntington Bank Shares. Zach, since you do operate in these geographies, including Texas, Ohio, Minnesota, North and South Carolina and more, you've got a nice regional view on where there is strength and weakness. Are you seeing any particular geographical weakness emerge anywhere? Really not. You know, I think pretty broad based growth. Well, one of the things we shared today in the earnings results is that, like we've seen for the last several quarters, the growth we're seeing is very balanced between what we're calling our core, all of the businesses we've been operating for a long time, but also our new initiatives.

11:36Zach Wasserman:Excuse me. The launches we're doing into North and South Carolina, into Texas. Recently, we launched our business into South Florida and a number of new commercial specialties. And we're seeing a nice balance across them. So, you know, kind of across our traditional Midwest footprint, we're seeing strong growth in Michigan. I was just up with our Michigan-based team earlier this week, and we're seeing 6 % year-over-year loan growth in that market, to give you a sense. In Columbus and in our central Ohio region where I'm based, we're seeing very strong economic conditions and a lot of expansion.

12:13Zach Wasserman:And then, of course, in some of the new geographies that we're growing into, North and South Carolina, Texas, Florida, we're seeing a fair amount of expansion there also. So not really seeing any areas of weakness. And, you know, again, as I noted, kind of the trend we're seeing month by month here is firming up pretty well. Zach, thanks for joining us. It's good to see you again. Happy third quarter. I can't believe we're already there. I hope you have a good summer and do come back soon. And join us once again. Zach Wasserman, Chief Financial Officer of Huntington Bank Shares. It's the holding company of the Consumer and Business Regional Bank, Huntington National Bank.

12:51Locations include Ohio, Minnesota, North Carolina, and more. Stock right now down about 2%. The company did report results a little earlier in the day. Also with us, Bloomberg News Senior Editor Nina Tretman. She does write the Bloomberg CFO Briefing Newsletter. You should sign up for it at Bloomberg.com slash CFO Briefing. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline.

13:28At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. As industries evolve faster than ever, companies need an environment that accelerates strategic growth. And Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance.

14:11With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app.

14:48Be smart. Get wise. T's and C's apply.