Jon Armstrong

Jon Armstrong inquired about Huntington Bancshares' expense trajectory, seeking clarification on the baseline for core expenses, the impact of the Cadence addition, and how cost savings are layered in, particularly considering Brent Standridge's comments on partnership benefits. He also asked how the 'partnership' approach with Veritex and Cadence generates goodwill, leading to better revenue and cost synergies and a faster timeline compared to traditional acquisitions. Additionally, he inquired about the level of investment embedded in the mid-single-digit underlying expense growth, asking if there are new investments or an acceleration in spend, and sought clarification on the level of Purchase Accounting Adjustments (PAA) embedded in the Net Interest Income (NII) guidance.

Answer

CFO Zachary Wasserman clarified that underlying Huntington expense growth is in the mid-single digits, aiming for 1.5-2 points of operating leverage, with Veritex and capital markets adding about one point to total expense growth. He noted the $1.1 billion Cadence addition represents 11 months of expenses, with 75% of cost synergies accruing in 2026, while emphasizing continued investment. Chairman, President, and CEO Stephen Steinour and President of Consumer and Regional Banking Brant Standridge explained that the partnership approach with Veritex and Cadence allows for greater speed and rigor in key decisions, creating certainty for colleagues and providing clear line of sight to cost synergies, thus accelerating value creation. Mr. Wasserman also stated that Huntington expects to grow investments by approximately 20% in the upcoming year, focusing on digital/technology capabilities, marketing, and talent, and clarified that the PAA embedded in the NII guide is between 7 and 10 basis points of NIM, consistent with prior expectations.

Jon Armstrong from RBC Capital Markets sought clarification on Huntington Bancshares' expense trajectory, specifically how the baseline core expenses, the Cadence addition, and cost savings would layer on, noting the $1.1 billion Cadence expense estimate. He also inquired about the 'partnership' approach with Veritex and Cadence, and how it fosters goodwill for better revenue and cost synergies compared to traditional acquisitions. In a follow-up, he requested a tighter range for first-quarter or early 2026 expenses and asked about the materiality of revenue-producing initiatives embedded in the expense guide, as well as the extent of Veritex and Cadence revenue synergies included in the current guidance.

Answer

Chief Financial Officer Zachary Wasserman clarified that the expense guidance includes underlying mid-single-digit growth for Huntington, aiming for 1.5-2 points of operating leverage, plus the full Veritex cost base and two small capital markets businesses, totaling 10%-11% year-on-year growth. He confirmed the $1.1 billion for 11 months of Cadence expenses, incorporating 75% of Cadence cost synergies in 2026, while also funding continued business investments. Chairman, President, and CEO Stephen Steinour and President of Consumer and Regional Banking Brant Standridge emphasized that the partnership approach with Malcolm Holland and Dan Rollins enabled faster, more rigorous decisions on board, management, and colleague structures, creating certainty and confidence in delivering value creation and cost synergies, particularly related to personnel. Mr. Wasserman demurred on quarterly guidance, reiterating the focus on achieving 100-200 basis points of positive operating leverage for the full year, and noted that very little of the revenue synergies from Veritex and Cadence are currently baked into the guidance, with a deep dive on expected revenue synergies planned for a later conference. He highlighted that investments have grown at a 20% clip for five years, focusing on digital technology, marketing, and people to power long-term revenue growth.