Fitch Affirms Huntington Bancshares, Inc.'s L-T IDR at 'A-' Following Large Regional Bank Review

NEW YORK--()--Fitch Ratings has affirmed Huntington Bancshares, Inc.'s (HBAN) ratings at 'A-/F1'. The Rating Outlook remains Stable.

The rating action follows a periodic review of the large regional banking group, which includes BB&T Corporation (BBT), Capital One Financial Corporation (COF), Comerica Incorporated (CMA), Fifth Third Bancorp (FITB), Huntington Bancshares Inc. (HBAN), Keycorp (KEY), M&T Bank Corporation (MTB), MUFG Americas Holdings Corporation (MUFG), PNC Financial Services Group, Inc. (PNC), Regions Financial Corporation (RF), SunTrust Banks Inc. (STI), US Bancorp (USB), Wells Fargo & Company (WFC), and Zions Bancorporation (ZION).

Company-specific rating rationales for the other banks are published separately, and for further discussion of the large regional bank sector in general, refer to the special report titled 'Large Regional Bank Periodic Review,' to be published shortly.

KEY RATING DRIVERS - IDRS, VRs AND SENIOR DEBT

Fitch's affirmation of and Outlook for HBAN's IDR is supported by the company's good earnings profile, solid capital, improved funding profile and stable asset quality performance, which is in-line with 'A-' rated regional peers. Notably, HBAN has improved its risk profile through various actions over the last few years.

HBAN has delivered solid results with return on assets (ROA) hitting an average of 1.13% and pre-provision net revenues (PPNR)/Average Asset averaging 1.70% over the last five quarters despite a difficult operating environment. Further, NIM compression has been more manageable versus peers. Fitch also believes many of these trends are sustainable, particularly given the company's good loan growth and stable credit performance.

Over the last two years, HBAN has been focused on growing its retail deposit base with much success reflected by the increase in non-interest bearing deposits which accounts for 28%. Nonetheless, much like peers, Fitch expects to experience a certain level of deposit run-offs but should be somewhat manageable.

Fitch notes that more recently the company's C&I loan growth has outpaced its peers despite a relatively slow economic recovery. To-date, credit performance has remained stable. Fitch remains cautious regarding C&I lending across the industry which remains very competitive.

Additionally, Fitch notes that HBAN has a sizeable indirect auto business. Given the CFPB's focus on the indirect auto space, Fitch believes there could be a potential disruption to the current business model.

RATING SENSITIVITIES - IDRS, VRs AND SENIOR DEBT

HBAN's ratings are at the high-end given 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, ratings would come under pressure. Additionally, aggressive capital management would also be viewed negatively.

KEY RATING DRIVERS - HOLDING COMPANY

HBAN's IDR and VR are equalized with those of its operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Ratings are also equalized reflecting the very close correlation between holding company and subsidiary default probabilities.

RATING SENSITIVITIES - HOLDING COMPANY

Should HBAN's holding company begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies. This is viewed as unlikely though for HBAN given the strength of the holding company liquidity profile.

Fitch is now considering introducing a rating differential between the holding company and bank in the U.S. due to structural changes in the sector and the evolving regulatory landscape, as described in the special report 'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles', dated March 27, 2014. Given Fitch's views that HBAN may not receive a long-term debt requirement, its ratings may not be impacted as a result of Fitch's evolving review regarding notching.

KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR

HBAN has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, HBAN is not systemically important and therefore, the probability of support is unlikely. IDRs and VRs do not incorporate any support.

RATING SENSITVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

HBAN's Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need.

KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by HBAN and by various issuing vehicles are all notched down from HBAN or its bank subsidiaries' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles.

RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The ratings of subordinated debt and other hybrid capital issued by HBAN and its subsidiaries are primarily sensitive to any change in HBAN's VR.

KEY RATING DRIVERS - SUBSIDIARY AND AFFILIATED COMPANY

The IDRs and VRs of HBAN's bank subsidiaries benefit from the cross-guarantee mechanism in the U.S. under FIRREA, and therefore the IDRs and VRs of Huntington National Bank are equalized across the group.

RATING SENSITIVITIES - SUBSIDIARY AND AFFILIATED COMPANY

As the IDRs and VRs of the subsidiaries are equalized with those of HBAN to reflect support from their ultimate parent, they are sensitive to changes in the parent's propensity to provide support, which Fitch currently does not expect, or from changes in HBAN's IDRs.

To the extent that one of HBAN's subsidiary or affiliated companies is not considered to be a core business, Fitch could also notch the subsidiary's rating from HBAN's IDR.

KEY RATING DRIVERS - LONG- AND SHORT-TERM DEPOSIT RATINGS

HBAN's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

KEY RATING SENSITIVITIES - LONG- AND SHORT-TERM DEPOSIT RATINGS

The ratings of long- and short-term deposits issued by HBAN and its subsidiaries are primarily sensitive to any change in HBAN's long- and short-term IDRs.

Fitch has affirmed the following ratings:

Huntington Bancshares, Incorporated

--Long-term IDR at 'A-'; Outlook Stable;

--Short-term IDR at 'F1';

--Viability rating at 'a-';

--Senior Unsecured at 'A-';

--Subordinated debt at 'BBB+';

--Preferred stock at 'BB';

--Support at '5';

--Support Floor at 'NF'.

Huntington National Bank

--Long-term deposits at 'A' ;

--Long-term IDR at 'A-'; Outlook Stable;

--Viability rating at 'a-';

--Senior unsecured at 'A-' ;

--Subordinated debt at 'BBB+';

--Short-term IDR at 'F1';

--Short-term deposits at 'F1';

--Support at5';

--Support Floor at 'NF'.

Huntington Capital I, II

--Preferred stock at 'BB+'.

Sky Financial Capital Trust I-IV

--Preferred stock at 'BB+'.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' (Jan. 31, 2014);

--'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles' (March 27, 2014);

--'U.S. Banking Quarterly Comment: 2Q14' (July 23, 2014);

--'Index Trend Analysis - 2Q14 (Fitch Fundamentals Index Falls to Neutral)' (July 15, 2014);

--'Risk Radar Global 1Q14' (April 1, 2014).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

U.S. Bank HoldCos & OpCos: Evolving Risk Profiles

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=742096

U.S. Banking Quarterly Comment: 2Q14 (Environment Constraining Earnings)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753107

Index Trend Analysis ¬タモ 2Q14 (Fitch Fundamentals Index Falls To Neutral)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752428

Risk Radar Global 1Q14

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=742560

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=891974

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Contacts

Fitch Ratings
Media Relations
Brian Bertsch, New York
Tel: +1 212-908-0549
Email: brian.bertsch@fitchratings.com
or
Primary Analyst
Doriana Gamboa
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
+1-212-908-0865
or
Secondary Analyst
Julie Solar
Senior Director
+1-312-368-5472
or
Committee Chairperson
Joo-Yung Lee
Managing Director
+1-212-908-0560

Contacts

Fitch Ratings
Media Relations
Brian Bertsch, New York
Tel: +1 212-908-0549
Email: brian.bertsch@fitchratings.com
or
Primary Analyst
Doriana Gamboa
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
+1-212-908-0865
or
Secondary Analyst
Julie Solar
Senior Director
+1-312-368-5472
or
Committee Chairperson
Joo-Yung Lee
Managing Director
+1-212-908-0560