Huntington Bancshares (HBAN): A Best-In-Breed Regional Bank

Huntington Bancshares Incorporated (NASDAQ:HBAN) is one of the better turnaround stories in the regional banking industry. The bank has seen the largest decline in book value over the last five years at 15% when compared to its major peers. At the height of the financial crisis the bank decided to reorganize its business model, starting with an overhaul of management. The other fundamental change included a shift from geographical expansion to a focus on product quality.

Net revenues are expected to be up 6% by the end of this year, on the back of an 8% rise in fee income. 2013 revenues are expected to come in relatively flat. 3Q results yielded no major surprises and showed consistent loan growth and solid net interest margins. Huntington’s loan growth comes at a time when other peers are winding down their portfolios, as Huntington concentrates more on commercial and industrial lending.

Huntington received approval for its dividend and share repurchase plan earlier this year – allowing the plan to continue into 2013. These include its 2.6% dividend yield and $182 million share repurchase plan – of which is it has $116 million remaining. Huntington has only missed one quarterly dividend over the past ten years – during 4Q 2010.

Huntington is seeing growth in mortgage banking as its Midwest operations – spread across seven states – see a better rebound in mortgage-related business than other major areas. We are also very encouraged by Huntington’s industry-leading return on equity of 11%, versus top peers PNC (8%) and SunTrust (8%). Billionaire Jim Simons is also excited about the bank, taking a new position last quarter (see all of Jim Simons’ new picks).

BB&T Corporation (NYSE:BBT) is up nearly 15% year to date and pays a solid dividend yield of 2.7%. BB&T performed relatively well through the financial crisis and is expected to grow earnings at one of the fastest rates (10%) over the next five years. Despite also trading at the highest P/E of the five banks listed here (11.1X), BB&T has quickly grown into more than just a typical regional bank, as it used the financial crisis to expand into the western part of the U.S. Billionaire Stanley Druckenmiller took a new position in this best-in-industry regional bank last quarter (see Druckenmiller’s new picks).