Huntington Bancshares: A Strategic Powerhouse with a Capital Efficiency Edge for Income Investors

In the ever-shifting landscape of financial services, Huntington Bancshares has carved out a niche that blends disciplined capital management with aggressive growth strategies. The bank's Q2 2025 earnings report, released on July 18, offers a masterclass in how to navigate a challenging interest rate environment while rewarding shareholders and positioning for long-term dominance. For income-focused investors, Huntington's performance in the quarter—marked by robust net interest income, disciplined credit risk management, and a compelling dividend profile—presents a rare combination of growth and income potential.

Strategic Growth: Loans, Deposits, and the Texas Play

Huntington's Q2 results underscore its ability to execute on its organic growth strategy. Net interest income surged 12% year-over-year to $1,483 million, driven by a 7% increase in average earning assets and a 12-basis-point expansion in the net interest margin (NIM) to 3.11%. This NIM growth is particularly noteworthy in a market where many banks are struggling to offset the drag from higher funding costs. Huntington's balance sheet management—particularly in commercial and industrial loans, which grew 15% year-over-year—has been a key differentiator.

But the story doesn't end there. The bank's deposit growth of $9.9 billion, or 6%, from the year-ago quarter, demonstrates its ability to attract and retain customers in a competitive retail banking environment. This is no small feat. The combination of loan and deposit growth has created a virtuous cycle: stronger asset yields and lower funding costs are fueling profitability, while the expanded balance sheet provides a foundation for future earnings.

The acquisition of Veritex Holdings, announced in Q2, is the next phase of this strategy. By acquiring a strong regional player in Texas—a market with one of the fastest-growing economies in the U.S.—Huntington is not just diversifying its geographic footprint but also accelerating its growth trajectory. Texas, with its robust commercial real estate market and thriving small business sector, offers Huntington a fertile ground to scale its fee-based revenue streams and deepen customer relationships.

Capital Efficiency: A Fortress of Strength

Capital efficiency is the bedrock of Huntington's long-term appeal. The bank's Common Equity Tier 1 (CET1) ratio of 10.5% and a tangible common equity (TCE) ratio of 6.6% as of June 30, 2025, are not just regulatory compliance metrics—they are signals of strength. These ratios, which have improved from 6.3% and 6.0% a year ago, respectively, indicate that Huntington has the capacity to fund growth without overleveraging its balance sheet.

The tangible book value per share, which has increased 16% year-over-year to $9.13, is another critical indicator. This metric, which adjusts equity to reflect the true value of a bank's assets, suggests that Huntington is generating real value for shareholders. For income investors, this is particularly reassuring: a strong capital base supports dividend sustainability and provides a buffer against economic downturns.

Moreover, Huntington's ability to grow fee-based income—despite a $58 million loss from securities repositioning—highlights its diversification strategy. Payments and cash management revenue rose 7%, wealth and asset management revenue increased 13%, and capital markets and advisory fees jumped 25% from the prior quarter. These noninterest income streams are less volatile than net interest income and provide a stable cash flow that can be directed toward dividends.

Dividend Appeal: A Sustainable Income Stream

For income-focused investors, Huntington's dividend profile is a compelling case study in balance. The bank currently offers a dividend yield of 3.65%, which is above the sector average of 2.9% and among the highest in its peer group. This yield is underpinned by a payout ratio of 47.3%, well below the 60% threshold often associated with dividend sustainability risk.

The recent ex-dividend date of June 17, 2025, and the corresponding $0.155 per share payment on July 1, 2025, reflect a consistent and predictable dividend policy. While Huntington's dividend growth has slowed in recent years (0.54% annualized over the past three years), its track record of uninterrupted payments since 1994 speaks to its commitment to shareholder returns.

The bank's capital position further reinforces this confidence. With a CET1 ratio of 10.5% and a tangible book value growing at a double-digit pace, Huntington has ample capacity to sustain and potentially increase its dividend without overexposing itself to risk. This is especially critical in a post-pandemic economy where credit quality remains a concern. Huntington's net charge-offs of 0.20% of average loans and a nonperforming asset ratio of 0.63% demonstrate its ability to manage risk without sacrificing growth.

A Long-Term Buy? The Case for Huntington

Huntington's Q2 results present a compelling case for income investors seeking both capital preservation and income. The bank's strategic acquisition of Veritex Holdings is a catalyst that could unlock new revenue streams in a high-growth market. Meanwhile, its capital efficiency metrics—CET1, TCE, and tangible book value—suggest that it is well-positioned to weather economic headwinds while continuing to reward shareholders.

For investors, the key question is whether Huntington's current valuation reflects its long-term potential. With a price-to-tangible-book ratio of 1.1x and a forward dividend yield of 3.65%, the stock appears undervalued relative to its peers. The recent 5% share repurchase authorization also signals management's confidence in the bank's intrinsic value.

In a market where many banks are struggling to navigate the transition from a low-rate to a high-rate environment, Huntington has emerged as a rare winner. Its ability to grow net interest income, expand its fee-based revenue, and maintain a strong capital position makes it a standout for long-term investors. For those seeking a combination of income and growth, Huntington Bancshares is not just a buy—it's a strategic bet on the future of regional banking.