Q4 2025 Earnings Call Transcript

Greetings, and welcome to the Huntington Bancshares Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Eric Wasserstrom, Director of Investor Relations. Eric, please go ahead.

Thank you. Good morning, and welcome, everyone, to our fourth quarter call. Our presenters today are Stephen Steinour, Chairman, President, and CEO; Brantley Standridge, our President of Consumer and Regional Banking; and Zachary Wasserman, Chief Financial Officer. Brendan Lawlor, Chief Credit Officer, will join us for the Q&A.

Earnings documents, which include our forward-looking statements disclaimer and non-GAAP information, and copies of the slides we'll be reviewing today are available on the Investor Relations section of our website, which is www.ir.huntington.com. As a reminder, this call is being recorded, and a replay will be available starting about one hour after the close of the call. With that, let me now turn it over to Steve.

Thanks, Eric. Good morning, and thank you for joining us. Beginning on slide three, as we enter 2026, the year of Huntington's 160th anniversary, it's a moment of pride, but even more a moment of anticipation. Our heritage and deeply rooted values continue to guide us, yet it's the opportunity ahead that energizes us.

We're focused on becoming the country's leading people-first, customer-centered bank, and that ambition is taking shape across the franchise. Nearly every part of Huntington is performing at a high level, creating powerful momentum as we look to the future. We've developed a differentiated operating model. Beginning next month, our consumer and regional bank franchise will have a presence in 21 states, many of the fastest-growing in the country.

Our local delivery of national capabilities is a franchise-defining competitive advantage. We also have a leading national commercial bank, which includes the fifth-largest equipment finance lender in the nation, 15 unique specialty finance verticals, as well as an expanding set of capital markets capabilities. These functions make us a premier provider to companies ranging from small and middle-market businesses to large corporate entities. Our approach is entirely customer-centric.

Our business lines lead with advice and guidance, deliver award-winning customer service, and are supported by top-tier digital capabilities. And we adhere to our aggregate moderate to low-risk profile. In summary, our vision and values guide how our colleagues support our customers. These attributes, combined with our scalable business model and recent positioning in the most attractive states, will enable growth far into the future.

Slide four illustrates the core components of our model and how they drove excellent full-year results for 2025. We have activated a flywheel of value creation in which our operating model drives sustainable high growth, enabling us to accelerate reinvestment and strengthen our competitive advantage. In '25, this model delivered truly outstanding results: 11% revenue growth, 16% adjusted EPS growth, 290 basis points of positive operating leverage, and strong credit performance. All of this drove powerful capital generation. Slide five summarizes our key messages.

First, our focused execution is generating significant organic growth. Second, we have proven expertise in integrating new partner banks. And third, we're delivering exceptional profitability and value creation to our shareholders. We are driving outstanding revenue, earnings, tangible book value growth, and returns while investing for growth in the years ahead.

As shown on slide six, our organic growth engine remains exceptionally strong. We delivered another year of significant above-peer cumulative organic loan and deposit growth. And as Zach will talk to in a moment, our value-added fee services are showing a similar trend. These outcomes reflect how our teams are executing with discipline across all of our customer segments.

This quarter, we delivered strong growth in primary bank relationships, up 4% year over year in consumer banking and 7% in business banking. We are focused on deepening customer relationships and expanding wallet share while maintaining diversified portfolios. Slide seven highlights some of the strategic investments we made in 2025 that accelerate our flywheel and enhance our long-term growth trajectory. We continued our branch build-out in North and South Carolina and expanded our middle-market banking in Texas.

We added new commercial verticals, and the Veritex and Cadence partnerships augment our scale and density in states that are projected to grow roughly 30% faster than the national average. We also added to our platform and capabilities. With the addition of TM Capital and Janney Capital Markets, we expanded the breadth of our financial advisory, as well as increased our categories of fixed income trading. Additionally, we added functionalities and services within our commercial payments platform.

We executed several integrated partnerships to deliver new fintech solutions for our consumer and small business customers, and we continued our investment in industry-leading digital capabilities. These initiatives expand the breadth of customers we serve, deepen our relationships, and help accelerate our fee revenue growth. In summary, 2025 was an extraordinary year for Huntington. Our outstanding financial results reflect the substantial investments we've made in our capabilities over the past several years, and we intend to continue investing across all elements of our franchise going forward.

These investments and our recent partnerships position us to sustain strong growth well into the future. With that, let me turn it over to Brant to share some updates on the partnership integrations.

Alright. Thank you, Steve. Starting on slide eight, I want to share our differentiated and proven approach to partnerships. Our approach is collaborative and transparent, designed to align around our common objectives, creating a strong foundation for long-term value creation.

We're able to quickly identify and engage the leaders and make thoughtful decisions around the talent of the combined organization. Our objective is to create a welcoming environment for our new colleagues. We work with rigor and speed, mobilizing dedicated teams to migrate our partners' entire organization to Huntington platforms. We thoughtfully sequence the activities to minimize disruption and operational risk.

We've found that this approach creates an experience that is as frictionless as possible for both colleagues and customers. We are also intentional about approaching key customer product migrations with a people-first, white-glove process. We actually like to call it the green glove process. We quickly deploy the full suite of Huntington capabilities, including products, balance sheet capacity, value-added services, and digital capabilities.

This approach for our new customer-facing colleagues enables them to stay engaged with their customers throughout the entire process, expanding their existing relationships and growing new ones. For their customers, it ensures continuity of service while gaining exposure to the expanded set of capabilities we can offer. This approach drives economic value by empowering and engaging our partners, being thoughtful and focused in our talent management and retention efforts, deploying the full breadth of our capabilities, developing deeper lending relationships and value-added services, and moving quickly to migrate systems.

We're able to realize substantial cost and revenue synergies. Turning to Slide nine, let me give you an update on how we've applied this approach to our partnerships with Veritex and Cadence. We've spent extensive time in the market with our new colleagues, aligning the local leadership structure and demonstrating our culture. For example, with Cadence, we undertook a 22-city tour right after the announcement to get to know our new colleagues and learn about their customers and the markets they serve.

We undertook similar meetings with Veritex and have frequent senior leader connectivity and end-market engagement. We could not be more excited to welcome these new colleagues to Huntington. Engagement with the leadership and colleagues of our partners is fundamental to our ability to execute integration activities quickly, effectively, and get to the critical focus of value creation. We have undertaken a thoughtful approach to our combined organization's talent decisioning with a lot of input from the Cadence management team and completed this work well in advance of closing.

This creates certainty for our new colleagues and provides immediate line of sight to a large percentage of our cost synergies. We've made significant progress on systems integration. With Veritex, we substantially completed this process last weekend. This concludes what has been an extremely efficient and well-executed conversion.

It's only taken 187 days since the announcement. We can say with confidence that Veritex is now integrated into Huntington. For Cadence, we're already advanced in our product and data mapping and expect systems migration to occur midyear. This would also represent a highly expedited time frame.

Because of these actions, we are already realizing our targeted cost synergies from Veritex, which we expect to be fully included in our run rate by the second quarter. For Cadence, we expect to begin realizing the identified cost benefits immediately upon closing and reach the full run rate in the fourth quarter of this year. As we deploy the full Huntington franchise in our new markets, we expect to begin benefiting from revenue synergies. This is already the case at Veritex, and we expect this to accelerate now that we are operating on the Huntington platform and our new colleagues have access to the full array of our product platform and capabilities.

We would expect a similar pattern in Cadence. Some revenue synergies achieved early after close and acceleration in the second half of the year and in 2027 following the systems migration. We are excited about how these two partnerships will springboard our growth in Texas across a number of new markets for us. We see extensive opportunities in these areas and across the breadth of our expanded footprint.

And we intend to invest to drive market growth, density, and share of customers' wallet. With that, let me turn it over to Zach to discuss the quarter's financial results in detail.

Thank you, Brant, and good morning, everyone. Beginning on slide 11, I'll cover our financial performance. We delivered exceptional profitability in the fourth quarter and for the full year of 2025, supported by strong organic loan and deposit growth, expanding fee revenues, improving margins, positive operating leverage, and excellent credit. For the quarter, earnings per common share was $0.30. On an adjusted basis, excluding acquisition-related expenses and other notable items, EPS was $0.37, up 9% year over year.

I'll review the drivers of this performance in detail on the next several pages. Turning to Slide 11, average loans grew 14.4% year over year, excluding the addition of the Veritex portfolio. Average loans grew $10.9 billion or 8.6% year over year. This growth was well balanced between core and new initiatives.

New initiatives account for $1.8 billion in the period and contributed nearly half of the total organic loan growth for the year. Key contributors included our organic expansion into Texas and North and South Carolina, as well as strong performance in our funds finance and financial institutions group commercial verticals. Of the remaining $1.4 billion in loan growth in the fourth quarter, from the core we delivered $500 million from corporate and specialty banking, $400 million from regional banking, $400 million from auto, $400 million from floor plan businesses, and $200 million from commercial real estate.

These gains were partially offset by a $200 million decline in equipment leasing, a $200 million decline in residential real estate balances, and a seasonal decline of $100 million in RV marine loans. All told, in 2025, we generated organic loan growth of $10.1 billion, which exceeded the $9.5 billion of loans added through our Veritex partnership. This performance underscores the exceptional execution by our colleagues across the company. The businesses are firing on all cylinders, and our teams continue to deliver outstanding organic growth.

Turning to deposits on slide 12, average deposits increased 5.1% quarter over quarter and 8.6% year over year. On an end-of-period basis, excluding Veritex, core deposits grew $5.5 billion year over year or 3.4%. We continue to drive strong volume growth while maintaining disciplined pricing throughout the rate cycle, resulting in a 35% cycle-to-date down beta. This performance is enabled by our sustained focus on growing primary banking relationships across both the consumer and commercial segments.

Veritex deposits contributed meaningfully to this quarter's growth while we optimized select acquired funding categories as planned. Together, these dynamics underscore the depth and quality of our relationship-oriented deposit-gathering capabilities and the effectiveness of our funding strategy. We continue to execute well on our down beta plan. Similar to the third quarter, we quickly implemented actions after the Fed rate reduction in December to achieve a 40% down beta in the last two weeks of the fourth quarter.

The deposit environment remains competitive. However, our approach to optimizing volume growth and pricing is working. Our goal remains to maximize revenue growth and ensure robust core funding for our continued strong organic loan growth. We will continue to manage our asset yields and funding costs to optimize this outcome.

On to slide 13, our NII dollar growth and margin expansion continue to demonstrate powerful momentum. During the quarter, we drove $86 million or 5.6% sequential growth in net interest income. This represents over 14% growth on a year-over-year basis. Net interest margin was 3.15% for the fourth quarter, up two basis points from the prior quarter and aligned to our outlook.

This is largely driven by contributions from Veritex core NIM. Expanding on that for a moment, as we've noted, Veritex closed in October, and the final rate marks and detailed loan level accretion schedule was updated at that time. This update resulted in a modest reduction in expected PAA and modest accretion to tangible book value excluding one-time costs. The updated schedule is noted in the appendix of the presentation for your reference.

Moving to fee income on slide 14, our fee businesses were strong across virtually every area. Year over year, payments grew 5%. Commercial payment revenues continue to be the primary engine of this growth, up 8% year over year. Wealth management grew 10%.

Adjusted for the sale of a portion of our corporate institutional custody and trust business last quarter, it grew 16%. This was powered by continued household acquisition and assets under management net inflows. Capital markets performed well, delivering its second strongest revenue quarter of all time, trailing only 2024. Some advisory deals did push from the fourth quarter to close early in 2026, and so our first quarter is off to a very good start. Loan and deposit fees are up over 20%, driven by strong loan commitment fees.

Based on our solid commercial lending pipelines, we expect this trend to continue over the next several quarters. Clearly, momentum in the fee businesses remains strong, and we anticipate broad-based growth going forward. On the next slide, I'll step back for just a moment to reflect on the multiyear of these businesses. Turning to slide 15, on a full-year basis, our fee income businesses have been growing at a steady high single-digit CAGR since 2023. And we see this CAGR as sustainable over our long-term planning horizon.

As we've highlighted many times, we view three businesses, payments, wealth management, and capital markets, as having long-term strategic growth opportunities. The financial performance of these businesses validates our strategy, which has focused on expanding where we believe we can offer these value-added services to our customers in a manner that enhances our relationship and meets their needs. Moving to expenses on slide 16, on a core basis, excluding one-time costs and the impact of absorbing Veritex's expense base, Huntington's operating expenses were up just $7 million sequentially, or just about one-half of 1%.

This reflects our cost discipline and focus on continuous expense reengineering, essential elements of our value creation flywheel. We set out in early 2025 to deliver positive operating leverage for the year, and we delivered results well above that budget. Coming into the year, our plan assumed approximately 100 basis points of positive operating leverage. It was a solid, achievable planning target given our growth agenda and the level of strategic investment we intended to sustain.

As we drove significant outperformance on revenues over the course of the year, we delivered a much wider 290 basis points of adjusted operating leverage while accelerating investments across our enterprise. This outcome is an expression of the model we've been building toward and will drive substantial value creation. Slide 17 recaps our capital position. Over the last year, we drove adjusted CET1 higher.

Our capital management strategy remains focused on our top priority of funding high-return loan growth, then supporting our strong dividend yield, and finally, capital return and all other uses. As we have noted, we intend to continue driving adjusted CET1 toward the midpoint of our 9% to 10% operating range. Given our projections for strong capital generation, we expect to have the capacity to add approximately $50 million per quarter of repurchases to the mix of distribution in 2026 following the close of our partnership with Cadence. Slide 18 gives an overview of how the flywheel of our operating and economic model is generating powerful return and driving shareholder value.

In 2025, we grew adjusted ROTCE by 40 basis points through robust PPNR expansion while simultaneously increasing our capital base. We have grown tangible book value 19% year over year while returning 40% of earnings through dividends. And as noted, we intend to initiate programmatic share repurchases in the near term. Turning to slide 19, credit quality continues to perform very well, with net charge-offs of 24 basis points.

Forward-looking credit metrics remain stable. The criticized asset ratio rose to 4.2%, primarily due to Veritex commercial real estate loans that we identified during diligence, and remains within our historical range. The nonperforming asset ratio was 63 basis points and has trended within our expected range for several quarters. Let's turn to slide 20 for our outlook for 2026. We're providing guidance for Huntington on a stand-alone basis, but given that we're only a few days away from closing our partnership with Cadence, we thought it would be helpful to give an initial view of how this might contribute to our 2026 results.

Naturally, we will refine this outlook after the close. Starting with net interest income, we expect growth on a stand-alone basis between 10% to 13%, supported by 11% to 12% growth in loans and 8% to 9% growth in deposits. We anticipate further net interest margin expansion this year, driven primarily by lower hedge drag and fixed asset repricing. We expect the NII contribution from Cadence this year to be approximately between $1.85 to $1 billion, including PAA.

We will update this outlook inclusive of PAA later in the first quarter after we've had the opportunity to do the analysis post-closing. In terms of earning assets, our cash plus securities portfolio is currently about 25% of total assets, and we expect to remain approximately at this level post-closing. On the topic of quarterly expectations for deposit and loan growth, we're expecting to see loans grow faster than deposits in the first quarter as we continue to optimize the funding we have received from Veritex and begin the integration of Cadence. After that, in Q2, Q3, and Q4, we expect to see deposits growing at a level consistent with loan growth as our normal organic process of core funding loans continues.

We expect to exit 2026 with our deposit growth in dollar terms equaling our asset growth, giving us strong funding momentum heading into 2027. Moving to noninterest income, we expect fee revenues to grow between 13% to 16%. This represents the continued strong contributions from our three core value-added services, further growth in our loan commitment fees, and the contribution from the new capital markets teams at TM Capital and Janney we added at the year-end 2025. We expect Cadence to add approximately $300 million in fee revenue. We plan to provide an update on our expected revenue synergies later in the first quarter.

We anticipate core expenses will grow 10% to 11%, and we expect to deliver a baseline of 150 to 200 basis points of operating leverage. This outlook includes the expected cost synergies we've targeted from Veritex, which we expect to be fully in the run rate of our cost base by the second quarter. We estimate Cadence will increase our expense base by $1.1 billion. Similar to Veritex, we expect to begin realizing cost synergies almost immediately after closing, with the full benefits run rating into expenses in the fourth quarter.

We expect net charge-offs for the year to be 25 to 35 basis points. Given our current starting point, we think losses will likely be at the lower end and normalize closer to the midpoint of that range over time. The combination with Cadence doesn't change this view. The effective tax rate for the year is expected to be between 19% to 20%.

The fully diluted average share count for the year, inclusive of Cadence-related issuance, is expected to be approximately 2.02 billion shares. For the first quarter, we expect the weighted average share count to be approximately 1.9 billion. Cadence's anticipated February 1 close will result in a partial quarter impact to several income statement and balance sheet items. Also, with the addition of Cadence, we have a new class of preferred shares, which we have addressed in the footnote in the updated appendix slide.

Pulling back, let me conclude our guidance discussion with a few observations. First, our current 2026 forecast for Huntington's stand-alone growth in NII, in assets, deposits, and fees generally exceeds the growth we've experienced in these categories in 2025, while our expected operating leverage is at the top end of our typical range. This underscores our focus on delivering strong organic growth even as we move through our integration with Cadence. Second, we are executing against our integration plans.

As noted, we expect to realize the cost synergies from Veritex in the second quarter and from Cadence in the fourth quarter. In terms of the revenue synergies, we have already begun to benefit from incremental lending and capital markets activity with former Veritex customers. And Cadence bankers are already actively engaged with their customers to educate them about the broader product platform and capabilities that we will be able to offer. We believe this will contribute to incremental revenue growth in 2026 and into 2027. Turning to Slide 21, we remain confident in our long-term trajectory.

Our operating model and the momentum across the franchise give us conviction in the sustainability of our targets for the medium and longer term. The investments we're making position Huntington for continued outperformance. Concluding on slide 23, our flywheel of value creation is working and poised to accelerate. Our differentiated business model drives strong growth and profitability.

As our profitability expands and we generate efficiency through cost reengineering, we increase our capacity to invest. As we drive robust investment back into our business, we grow our competitive advantage. That competitive advantage drives further market differentiation and customer expansion, driving revenue growth and sustainable share gains in a virtuous cycle. Looking ahead to 2026, we believe the benefits of our strong organic growth and recent partnerships will enable further expansion of our investment capacity over the next several years.

This will increasingly distinguish us from our peer set and drive substantial shareholder value. With that, we'll conclude our prepared remarks and move to Q&A.

Thank you, Zach. We will now take questions. We ask that as a courtesy to your peers, each person ask only one question and one related follow-up question. If you have additional questions, please return to the queue. Thank you.

We will now be conducting a question and answer session. Our first question today is coming from Erika Najarian from UBS. Your line is now live.

Hi, good morning. Thank you for taking my questions. First question is just a clarifying question on the expense trajectory, both the baseline and the Cadence addition and how we layer on the cost savings. So given that you gave the guidance on standalone, I'm guessing the baseline for core expenses would be $4.82 billion, which excludes two months of Veritex.

And then we layer on the standalone growth. I guess the other part of the question is that $1.1 billion is equal to eleven months of Cadence based on consensus 26. And so I'm wondering, as I think about Brant's comments, if we then layer on the cost saves, and then I just have a follow-up.

Sure. I'm not sure exactly what your question was there, Erika, but I'll take it and sort of just unpack where the expense guidance is. Fundamentally, what we see at this point is underlying Huntington expense growth in mid-single digits, aligned to generate one and a half to two points of operating leverage. And then with Veritex, bringing in the entirety of the Veritex cost base, and also, I would note the two small capital markets businesses that we added on January 1. Those add about one point of total Huntington expense growth, obviously, more revenues as well.

But that piece comes in. And so the totality of all of that together is the 10% to 11% year-on-year growth, which generates really positive operating leverage, 150 basis points to 200 basis points, you know, clearly on top of the 300 basis points of operating leverage we generated in '25. And then Cadence is the $1.1 billion added on, as you noted, eleven months of expenses. It represents the full complete of the cost synergy program for both Veritex and Cadence, by Q2 and Q4 respectively. And aligned to the previous guidance we've given about 75% of three-quarters of the Cadence cost synergies accruing in 2026. You know, I think what is also in there clearly, I tried to highlight this in some of my prepared remarks, is continued investment back into the business.

And we think that that is a terrific model not only to drive the kind of revenue performance we're achieving in '26, but even more importantly, over the longer term and continue to drive the competitive and share gains that we've got. So all of that is embedded in that, and we think it's the right model and right posture at this point.

Got it. That's clear. So that addition includes both cost saves and investments back into the business. And the second follow-up question I had, maybe at the is more for Steve and Brant.

I thought it was notable that when you talk about Veritex and Cadence, you say the word partnership very intentionally. You know, maybe talk about how your approach has been generating more goodwill in order to perhaps create revenue synergies and cost synergies. And perhaps a better timeline than other traditional acquisitions that are perhaps not treated as partnerships.

Erika, great question. And I'm going to let Brant answer this for the most part because he's been on point driving this. Literally from the outset. But the format of the partnership has been incredibly beneficial to us.

And we have great partners in both Malcolm Holland and Dan Rollins and their teams. And because we've been able to work together very tightly, and Brant will expand on this significantly, we are in a much better position with confidence on both the expense and the revenue synergy side. So, Brant, over to you.

Well, Erika, thank you for the question. One of the things that partnership has allowed us to do is to really move with greater speed and rigor on some of the key decisions. And as it relates to board decisions, management decisions, all of our colleague decisions, organizational structure decisions, all of those have been decided and communicated. And that creates a high level of certainty for the colleagues of both Veritex and Cadence.

It creates a lot of familiarity for them and, frankly, gives us a lot of confidence in our ability to deliver on the value creation given that we've created so much certainty for them so quickly. The other component, as you know, a large percentage of the cost synergies revolve around people. And so moving quickly to decide on our make all that key people decisions in the case of Cadence gives us a line of sight to the majority of our cost synergies there. So that partnership approach clearly gives us some advantage or a lot of advantages when we think about both cost and revenue synergies.

And the teams have just been outstanding. The collaboration here, phenomenal. We are very impressed with the quality of the teams. And both these banks are well run. So these are not sort of fixer-up turnarounds. This is bringing our capabilities, products, etcetera, to terrific teams, which, as Zach pointed out, we will be further investing in to drive the revenue growth in the years ahead.

Thank you. Our next question today is coming from Jon Arfstrom from RBC Capital Markets. Your line is now live.

Thanks. Good morning, guys. Zach, I think you're gonna get a workout this morning, but on expenses. But anything you can do to give us a little tighter range on expected first-quarter expenses or early '26 expenses just to help set this up?

I'll Demir, I'll give you a quarterly guidance. I do appreciate it. Look, if I take a step back, for us, what's important is driving for positive operating leverage. And as we've noted sort of a number of times, even in the prepared remarks highlighted this for 2025, we come into the year thinking somewhere between one hundred and two hundred basis points of operating leverage as a really good level supports the long-term earnings growth rate that we want to achieve.

It also is the right balance for us as we execute that flywheel model. Driving reengineering into baseline costs, reinvesting deeply back into the business. To really power continued long-term revenue growth. And so I think that's the approach that we're taking in it, and we think it's the right one, as I noted before.

You know, I will also highlight if you look at that guidance slide, just stare at that plus cadence column, the marginal profitability that we're as we bring cadence into the business is really significant. It's a 50% marginal efficiency ratio, and that's even before the full cost synergy. So all of this for us adds up to an earnings growth trajectory that continues to meet our objectives. And generate ultimately the long-term financial commitments that we've set, importantly, including that 18% to 19% return on capital.

Okay. Alright. Just another question here just for clarification. On Slide 20, you talk about the revenue-producing initiatives that are embedded in the expense guide. How material are those? And then what revenue synergies, if any, from Veritex and Cadence is included in the guide? Thanks.

Yes. Good question again. And the answer is very little of the revenue synergies are baked into the guidance at this point. This continues to be aligned to the longer-term objectives that we've said and we discussed at the Cadence partnership announcement call.

I guess Brant highlighted in his prepared remarks, our expectation is to share a deep dive around where we expect the revenue synergies to be later this quarter in a further conference and then to layer that on and provide the right guidance around that. So a lot more to come there. Very excited about it. You know, the thing about the investments up into the business, you know, we've been growing investments back into the company at about a 20% clip for five years in a row.

Our expectation is to continue the same. And the focus areas for those investments really continue to be digital technology development and capabilities across all areas of our business. Marketing to acquire new customers. There's gonna be a terrific opportunity to deploy digital acquisition across the new partner acquired footprints.

And then, you know, people to build out the businesses that we've been growing, and we'll continue to do that.

Thank you. Next question is coming from Ken Usdin from Autonomous Research. Your line is now live.

Thanks. Hey, Zach. Can you just back to Slide 20, do you have the starting point FY 'twenty-five baseline for core expenses that the 10%, 11% is built on?

Sure. It's $4.871 billion. Yes. Exactly.

Okay, great. Thanks. And then the second question is I guess there's a little back and forth today about the cost base still being a little bit higher. But I wanted to ask if I look back at the October deck when you talked about $2 of pro forma EPS in seven.

I just want to make sure that there might be some timing differences in terms of how much you're reinvesting and how much things all come together. So we're still tracking towards that $2 pro forma EPS that you guys had suggested back in October in the merger deck?

Yes. It's a terrific question, Ken. It's a I love that question because it kinda comes back to ultimately the value creation model that we're trying to drive here is what is where our focus is and the answer is yes. We continue to be on track for the fundamental drivers of that earnings power.

If you think about it, the way I think about it is first of all, three major drivers of value creation from the partnership: seamless integration, and retention of talent and kind of continuing with the momentum of the underlying businesses. I will note that both Veritex in the period after close before conversion performing exceptionally well, driving above expectations loan and deposit and revenue growth. And Cadence, likewise, we haven't even closed. We're expecting that just a week from now.

They just reported their results this morning and those likewise. Expectations continue to show very strong underlying growth in SAAR. Partnership model would just enable that to continue. Secondly, it's the cost synergies.

We have full line of sight to achieve or beat them. And then lastly, it's these revenue synergies, which are not in this guidance yet, but really will be powerful as we add those on. We continue to finalize the plans to go and achieve them. And so those are kind of the fundamental building blocks.

As I think about the EPS, you know, look, we've generated 16% earnings per share growth in twenty-five. The guidance I've given here on page 20 applies somewhere in the kind of mid to high teens for underlying organic EPS in '26. You should expect the same kind of growth in earnings power as we go into 'twenty-seven. And on top of that, you'll get the full run rate of the cost synergies that's probably something on the order of a dime. And then revenue synergies and of course the PAA will be what it is.

Ultimately, and we'll give guidance on that once it's finalized.

Thank you. Our next question today is coming from Matthew O'Connor from Deutsche Bank. Your line is now live.

Good morning. You gave the expense impact from the capital market deals? You said it added about 1% to the expense base. How about on the fee side? What's your rough estimate on the fee contribution from the corporate market deals?

Yeah. It's coming in sort of $80 million and $90 million of expense above revenues.

Okay. Then I guess maybe talk about some of the other drivers of the fees because obviously, my model could have been wrong, but the fee guide seemed better than I had even adjusting for like, $80 to $90 million. So maybe some details in terms of what are the key drivers of that growth?

Totally. Fundamentally, if you think about fees, this year in 2020 well, last year, twenty twenty-five, we generated 7% growth in core fees and it was 8% in those three major fee-driving categories we talk a lot about payments, cap markets, and wealth management. As we go into 2026, our expectation was to see acceleration of all of that all of those categories, something on the order of one to 2% acceleration, and we've got strong line of sight to delivering that. As we've noted, it's been a locus of a lot of investment over time.

So we're seeing that come through now in terms of acceleration of revenue growth. And then on top of that, you will add the $80 to $90 of revenues from the two new small capital markets divisions that are joining us plus Veritex. And so that's really the kind of the ingredients that could get us to this guide. And have strong line of sight and confidence to deliver.

Thank you. Our next question today is coming from Ebrahim Poonawala from Bank of America. Your line is now live.

Hey, good morning. This is Eric on for Ebrahim. Just maybe another one on the expense side. I was curious if you can talk about the level of investments that you guys have embedded into that underlying Huntington expense growth that you've mentioned at the mid-single digit. Anything new there, any new investments or acceleration in spend that's kind of embedded?

Yeah. Good question, Eric. Thanks for the follow-up. I'll highlight that we expect to grow investments at around 20% back into the business as we go into this upcoming year.

And again, as noted before, the kind of the focus of that is always threefold. Digital and technology capabilities across the business, secondly, marketing and last, people to build out their business. So I think about the kind of the initiatives that will power, you know, we're still early days in a lot of the major new growth initiatives we've been talking about the last couple of years. New commercial specialty verticals, both lending and deposit-oriented new geographies that we've been growing into organically, North and South Carolina, Texas, all of those will be focused for continued investment.

We've talked about in the Carolina, for example, the expectation in 2026 is to open a new branch there almost every two weeks. And so, of course, that'll be an area that we're investing in. And then, you know, I think Brant highlighted earlier, one of the biggest areas that we see opportunity to really capture revenue synergies in the combined franchise is in digital acquisition and customer acquisition across the footprint. And so there's funding in the investment plan to go after that.

Got it. That's helpful. And then I think just to quick follow-up to clarify. I know you said you'll provide more details post the close, but was curious what level of PAA is embedded into the NII guide? Thanks.

Yep. Because it's somewhere between seven and ten basis points of NIM of, you know, aligned to the prior expectations we had. Again, think we've highlighted that in the Cadence earnings call or Cadence deal announcement call, and we'll update that as we get through the close here in the next month.

Thank you. Next question is coming from Manan Gosalia from Morgan Stanley. Your line is now live.

Hey. Good morning. Hi, Manan. Hey.

Good morning. Zach, in your comments on the investment spend, just now, you didn't mention AI. Is there any AI-related investment spend in there? And I guess the broader question there is, given that there's a lot going on this year with the acquisitions, that's probably driving a lot of your investment spend.

Would you say that 2026 is a high point for investment spend that you plan to make?

Thanks, Manan. Great questions both. And to answer the second one first, the answer is no. Investments are not a high point here.

In fact, investing into the business is the flywheel of value creation that we just talked about. We will always want to grow investments at a fast clip and just think about the model going on for a second. Look back at the last six years. Revenue growth CAGR 10%, investment growth CAGR just about 20%, earnings growth in the teens.

And so that model is a sustainable long-term model and we will keep driving it. And it's powered by, you know, not only earnings growth, but also disciplined reengineering of our cost base, something on the order of 1% per year. And so that's the model we expect to sustain perpetuity, and that's what's driving our competitive success. You know, if you just move to AI, absolutely there's significant investment happening in AI.

I wouldn't characterize the nature of the driver of our investment growth as because of AI certainly, is growing along with those other investments as well. And we're seeing use cases across the organization really exponentially increase at this point. Driving cost savings, driving productivity, driving a better customer experience in lots of different ways, and of course more efficient technology engineering.

And then on what Zach referenced, digital and technology, the AI was included in that.

Thank you. Our next question is coming from Steven Truback from Wolfe Research. Your line is now live.

Hey, this is actually Eric. Hey.

Derek, this is Derek. Thanks for taking the question. Our first question we had was on credit guidance. And it looks like, like, the year-on-year increase, like, our assumption is a lot of that is, like, kind of the seasoning of the loans you've put on the last year. But just curious if that's right. Just sort of what would cause you to fall on like one end of the guidance range or the other.

Derek, you're yeah. I think you're talking a little light too. You have you repeat it? I think you referenced seasoning as the reason for the guide.

Yes, I'm sorry. Yes, that's right. Just

Yeah. That's that was the case, let me just say that yes, there's a little bit of that in there. But I mean, the reality is the performance this year was just exceptional. And as you look back over the history, we've been trending between that 25 to 35 basis points range for some time.

And that's really the basis of our guide. And as Zach said in his prepared remarks that we would be really in the lower end of that range. And so that's really the expectation for 26.

Sure. That's

And then just a follow-up question on the deposit beta. You mentioned the 40% beta in the last two of the quarter. Just curious as we're thinking about two more rate cuts, if that's also the right level to be thinking about with incremental cuts on the way down? Thank you.

Yeah. Yeah. That's also a terrific question. It's an area of a lot of focus as you know.

And, you know, our expectation is to continue to get a solid down beta, something in the high 30s to 40%, aligned with the guidance we've given. You know, I'll tell you that, you know, beta in and of itself is not our objective function. Our objective function is core funding loan growth really powering the ability to continue to drive peer-leading both loan growth and revenue growth with a great marginal return on capital. And that model is working exceptionally well, and you see no.

It's, of course, a competitive environment, but you know, the ability of the teams to execute on both volume growth and disciplined pricing continues to be very strong.

Thank you. Our next question is coming from Chris McGratty from KBW. Your line is now live.

Great. Good morning. Hey, Zach. Going back to the tech conversation for a second, this quarter, a lot of focus you know, tech wallet, growth rate, percent of revenues. Any I heard you on the, you know, of the three things that you're really investing in. But do you have dollars around what you're putting into tech and the rate of growth?

Yes. Great question, Ken. We're smiling here because Chris, I'm sorry. Because we're our expectation is in some of the conferences later this year later this quarter, truly double click into the investments just to share with you more guys on it.

So I won't steal that thunder and give you a number today, but certainly, it's a powerful growth, and we've seen you know, in our view, we're investing in technology in exactly the right places. It's all about customer-facing capabilities, driving both our value-added services, but also acquisition, digital marketing, you know, the question that we just got a second ago in terms of beta, you know, the amount of MarTech capability that we've built over the last several years is really what's enabling us to achieve these dual results of great deposit volume and pricing. So, you know, those are the kind of things that we put our in the technology investments against.

I'll come back to you with more details here in short order as we go to these conferences.

Understood. Yep. We'll wait for that. And then on kind of the balance sheet, a lot of times, you do acquisitions companies. Have certain portfolios that know, maybe don't fit strategically. As you kind of evaluate both portfolios, is there any tweaking that you presume, might happen in the next, you know, quarters as you get to another company a little bit better?

Chris, as we looked at both partnerships and combined with the that would do for the portfolios, like it on the whole. And there's not, say, an exit portfolio. There's a little more commercial real estate construction than we would prefer, and we'll manage that in due course. Nothing special.

With that. And we've got some great growth areas that we're looking for that will offset anything we end up doing on the construction side.

Our next question is coming from Brian Foran from Truist.

Hey, I'm going to apologize in advance. I'm still on the struggle bus with the guidance. So on expenses, I guess the way I'm trying to think about it is, if I understand the math right, you plan on reporting something like $6.5 billion of expenses this year, maybe $6.46 billion to $6.5 if I take the guide literally. And then as I think about the exit from the year, pushing that up would be the twelfth month of cadence.

Pushing that down would be the cost saves. But then maybe pushing that back up is how much of the cost saves are reinvested over the course of the year? So is there any way to relate because people have really different takeaways. Some people are like, gonna exit the year with, $6.6 billion.

Some people are we're gonna exit the year at $6.2 billion. Like, is there any way to talk to exit run rate of dollars of annualized expenses for the whole thing pro forma?

I don't have that right in front of me to be honest with you, Brian. My guide that you would see like, I think we're gonna on a full year, see an efficiency ratio of around 55%. And we'll continue to see that improve as we go into '27. The growth rate of expenses relative to revenue should be very attractive as we get through Q4. And also kind of goes back to that question we talked before. Are we on track for earnings power in 2027?

And the answer is yes.

Okay. Maybe I have to try the same question on loan growth because I'm tying myself in the same set of knots. Like, we get to the back half of the year, you know, everything's integrated. We're not talking about the year over year.

We're talking about quarter over quarter annualized. So Veritex and Cadence aren't in there. Like I don't know if the Cadence number for loans is just where they are today or some assumption in it. But, like, you kinda put this all together.

Would you expect to be like, still at 9% annualized loan growth exiting the year like where you are today before the acquisitions? Would you expect it to be slower as you do the integrations, faster as you recognize revenue synergies like any any kind of you know, again, I understand the difficulty of doing a guide on what you're gonna report when things are partial year impacts. But once we get through that, any way to talk to like what you expect the core loan growth rate to look like in the back half of 'twenty-six? Again, linked quarter annualized, not year over year.

Yeah. Yeah. Good question for sure. Look, the way I think about it is our underlying loan momentum has been in the 8% to 9% range in 2025. As we thought about Huntington standalone in 2026, our expectation was around the same amount.

And in our long-range plan when I say long-range plan, I typically mean so the next few years after that three years, was of a similar growth rate. You know, one of the strategic themes and rationales for us entering the partnership with Cadence and also with Veritex was that they would expose Huntington to even faster organic growth opportunities over the course of time and create new to invest and build the business from there as well. And so that 8% to 9% to me is a minimum. We would expect to see revenue synergies, growth synergies lift that particularly in the near term.

Of course, not giving 27 guidance this morning, but I think that kind of fundamental growth power is at or better as we get into the latter part of '26 and beyond.

Thank you. Our next question is a follow-up from the line of Ebrahim Poonawala from Bank of America. Your line is now live.

Hello?

Hello? Hello?

Hey. Hey, Graham. This is Vikram. Hey, Steve.

Just a big picture question. Beyond all the guidance-related questions. It feels like there's a lot going on at the bank. In terms of banker hiring, a couple of deal integrations.

As we look forward, just talk to us in terms of how you feel about just the integration of all this over the next six to twelve months. And I think there's an expectation that Huntington could still be on the lookout for additional deals, how should shareholders think about the potential for more M&A over the next maybe six months?

Ebrahim, thank you for the question. We sort of thought that one would come even a little earlier. Initially. But we let's start with we've got two partners.

And they are performing exceptionally well with us. The teams are doing great work together. Brant, Dan Rollins, Malcolm Holland, and their teams and our team have come together in a very fundamentally sound and strong fashion. We're off to a great start.

We've just completed we are completing the Veritex conversion as we speak. Started over the weekend. We will close with Cadence in two weeks. As you heard from Brant, the org management and personnel decisions are made and communicated.

We're moving very quickly. With that. At the same time, the core of the company is performing well, and that's our primary focus, drive the core results. So we're completing these integrations.

They don't end at a conversion, but we're completing these conversions over the course of this year, maybe this year a little bit more in terms of culture. But rapidly so we can get at the revenue opportunities that we've talked about. And we've used this term springboard on purpose. We think we have great growth potential in these markets.

They're much better on average than the markets we've been operating in. And Texas is very unique, and we come together with a number five share. So we've never been in these markets or markets like these before. So very optimistic, we're very focused on driving organic growth and executing these integrations extraordinarily well.

And the partnerships are facilitating that and we're aligned at creating shareholder value. As to other M&A, maybe someday, we've been clear. I think it was the Goldman conference. We're not gonna do an MOE.

We're not gonna go to auctions. They have to be strategic in nature where they're adding value and revenue growth. For us. And they have to meet financial and risk metrics.

And, you know, if someone approaches us with something of that nature, then we would take a look at it. But we're very focused on driving the organic growth of the business. And that's priority one, two, and three for us. We like the position we're coming into '26 with.

And the momentum we have, and we're ecstatic about the quality of the partners. These are two really good banks, great people, coming into Huntington. I think we've got a terrific back half of this decade. Just with these combinations.

Got it. And while I have you, maybe, Zach, just clarifying the 55% efficiency ratio you believe for full year 2020?

Your voice cut out a little bit there, maybe at the end. I think you said am I confident we'll hit 55% efficiency ratio? Is that right?

Yep. Yep. 55 for '26. Yeah.

Yep. Very, very confident.

Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you all for joining us today. We didn't mean to confuse you and I hope we've sorted some of that out in the discussion. We're performing very well. We're coming off an extraordinary year.

We've got a lot of momentum. And very clear objectives as we move into '26. We've never been better positioned for the future and we're excited about that. And our 20,000 colleagues and soon to be 25,000 are gonna do everything we can to create shareholder value and build the franchise for years and years to come. We look forward to welcoming these 5,000 new colleagues coming to us from Cadence in the next couple of weeks.

Thanks for your interest. We'll be back to you mid-quarter for more details on the models, and appreciate again your support. Have a great day.

Thank you. That does conclude today's teleconference and webcast. You may now disconnect your line at this time and have a wonderful day. We thank you for your participation today.