Fitch Details Rating Rationale on Upgrade of HBAN's IDR to 'A-' Following Large Regional Bank Review

Tue Oct 8, 2013 1:48pm EDT

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(The following statement was released by the rating agency) NEW YORK, October 08 (Fitch) Following its large regional bank peer review, Fitch Ratings has upgraded Huntington Bancshares, Inc.'s (HBAN) long-term Issuer Default Rating (IDR) to 'A-' from 'BBB+'. The Rating Outlook is revised to Stable from Positive. Please refer to the release titled 'Fitch Takes Rating Actions on Its Large Regional Bank Group Following Peer Review' dated Oct. 8, 2013 for a discussion of rating actions taken on the large regional banks. A complete list of rating actions on HBAN follows at the end of this release. KEY RATING DRIVERS - IDR & VR Fitch's upgrade of HBAN's IDR is supported by the company's good earnings profile, solid capital and liquidity position, and stable asset quality performance, which is currently in-line with 'A-' rated regional peers. Despite a difficult operating environment, HBAN has delivered solid results with ROA hitting an average of 1.13% and PPNR/Average Assets averaging 1.70% over the last five quarter-end periods. Although not immune to the pressures from the low interest rate environment, HBAN's NIM compression has been more manageable versus its large regional peers. Incorporated in Fitch's rating action is the view that current operating trends are sustainable. Fitch also believes that given the company's improved risk profile, credit metrics should remain stable and within its normalized range 0.35%-0.55%, although for 2Q13 NCO were slightly below at 0.34%. Additionally, the company's strong non-interest bearing deposit growth (up 65% over the last two years) has lowered its structural funding costs. The company's is also targeting positive operating leverage position, which should support the bottom line. HBAN's capital position is also considered to be strong as its estimated Tier 1 common under Basel III is on the higher-end of peers at 10.11% for 2Q13. RATING SENSITIVITIES - IDR & VR HBAN's ratings are at the high-end given that at the current rating of 'A-' performance is in-line with peers. Although not expected, should HBAN's performance fall below current levels such as ROA and NIM or credit measures weaken with outsized losses impacting capital levels, ratings would come under pressure. Additionally, aggressive capital management would also be viewed negatively. Fitch has upgraded the following ratings: Huntington Bancshares, Incorporated --Long-term IDR to 'A-' from 'BBB+'; Outlook Stable; --Short-term IDR to 'F1' from 'F2'; --Viability rating to 'a-' from 'bbb+'; --Subordinated debt to 'BBB+' from 'BBB'; --Preferred stock to 'BB' from 'BB-'. Huntington National Bank --Long-term deposits to 'A' from 'A-'; --Long-term IDR to 'A-' from 'BBB+'; Outlook Stable; --Viability rating to 'a-' from 'bbb+'; --Senior unsecured to 'a-' from 'BBB+'; --Subordinated debt to 'BBB+' from 'BBB'; --Short-term IDR to 'F1' from 'F2'. Huntington Capital I, II --Preferred stock to 'BB+' from 'BB'. Sky Financial Capital Trust I-IV --Preferred stock to 'BB+' from 'BB'. Fitch has affirmed the following ratings: Huntington Bancshares, Incorporated --Support at '5'; --Support Floor at 'NF'. Huntington National Bank --Short-term deposits at 'F1'; --Support at '5'. The Rating Outlook is Stable. Contact: Primary Analyst Doriana Gamboa Director +1-212-908-0865 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Julie Solar Senior Director +1-312-368-5472 Committee Chairperson Christopher Wolfe Managing Director +1-212-908-0771 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Fitch Takes Rating Actions on Its Large Regional Bank Group Following Peer Review' (Oct. 8, 2013). --'Global Financial Institutions Rating Criteria' (Aug. 15, 2012); --'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012); --'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05, 2012); --'Bank Support: Likely Rating Paths' (Sept. 11, 2013); --'The Evolving Dynamics of Support for Banks' (Sept. 11, 2013); --'Risk Radar' (Sept. 5, 2013); --'U.S. Banking Quarterly Review: 2Q13 (Record Net Income in No-Growth Environment)' (Aug. 16, 2013); --'U.S. Banks: Liquidity and Deposit Funding (Diminishing QE Effectiveness and its Impact on Systemic Liquidity and Funding)' (Aug. 8, 2013); --'U.S. Bank Mergers and Acquisitions' -- When Will The Catalysts Kick In? (July 11, 2013); --'U.S. Banks: Interest Rate Risks (What Happens When Rates Rise)' (June 18, 2013); --'U.S. Banks -- Home Equity Reset Risk Hitting the Reset Button in 2014' (April 29, 2013); --'U.S. Banks: Rationalizing the Branch Network (Witness the Incredible Shrinking Branch Network)' (Sept. 17, 2012). ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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