Wednesday, January 27, 2016 4:04:01 PM
Michael Behan, CFA Equity Sector Analyst
Price: $8.27
Sector: Financials
Dividend: $0.28
Dividend Yield: 3.4 %
Industry: Regional Banks
Market Cap: $6,574 million
Huntington to Buy FirstMerit for $3.4B
• Tuesday before the open, Huntington Bancshares Inc. and FirstMerit Corp. the Ohio-based companies announced a merger agreement where HBAN will acquire First Merit for $3.4B in cash and stock.
• Correspondent providers Morning Star and Credit Suisse rate Huntington Bancshares (HBAN) Neutral and Buy respectively. Morning Star gives FirstMerit Corp (FMER) a buy rating.
• ASG prefers to non-life insurance and companies with less interest rate exposure when investing within the Financial sector, and therefore we recommend underweighting regional banks. For clients looking for exposure to banks we like JPMorgan (JPM), US Bancorp (USB) and BB&T (BBT).
Columbus-based Huntington will buy Akron-based FirstMerit for $3.4 billion in total, exchanging 1.72 Huntington common shares and $5 in cash for each FirstMerit common share. The per-share consideration of $20.14 is based on Huntington's Jan. 25 stock price of $8.80 per share.
The merger, which is expected to close in the third quarter and is still subject to regulatory and shareholder approvals, will likely be accretive to Huntington's EPS in 2017, excluding one-time deal-related expenses, and be approximately 10% accretive to EPS in 2018.
The pro forma tangible capital equity-to-tangible assets ratio is pegged at 7.1% at closing and the pro forma common equity Tier 1 ratio at 8.7% on a fully phased-in Basel III basis. Huntington will not re-submit its 2015 CCAR capital plan, and intends to forgo the remaining $166 million of share repurchase capacity. Huntington will include FirstMerit in its 2016 CCAR capital plan proposal and expects the plan will include share repurchases.
Valuation: Shares of HBAN currently trade at 9.2x the next 12-month consensus EPS estimate of $0.88 , compared to the historical average of 12.0x . On a relative P/E basis to the S&P 500 Index, HBAN trades at 0.6x compared to the historical average of 0.8x .
Risks: Investing in the financial sector comes with a number of risks. In general, credit is sensitive to the swings of the economic cycle; a downturn in the economy often results in higher default rates resulting in lower earnings and stock prices. Financial companies typically carry outsized leverage relative to other sectors which can magnify negative outcomes. Furthermore, the sector is the most highly regulated relative to other sectors. Regulatory actions can negatively impact capital, profitability as well as shareholder returns.
Just my opinion, of course.
Recent HBAN News
- AIG names new CFO; Progyny Drops 24% After Losing Key 2025 Contract; Exicure Jumps 190% With Nasdaq Extension • IH Market News • 09/19/2024 10:26:48 AM
- Huntington Bancshares Incorporated Decreases Its Prime Rate To 8 Percent • PR Newswire (US) • 09/18/2024 09:00:00 PM
- Huntington Bancshares Incorporated Declares Cash Dividend On Its Series I Preferred Stock • PR Newswire (US) • 09/13/2024 12:00:00 PM
- Huntington Bank Names Timothy Miller Chief Communications Officer • PR Newswire (US) • 09/12/2024 05:15:00 PM
- The Cleveland Browns and Huntington Bank announce 20-year partnership that includes stadium naming rights • PR Newswire (US) • 09/03/2024 03:00:00 PM
- Capstone Partners Appoints Ken Wasik as Co-Head of Investment Banking to Support Ongoing Strategic Growth • PR Newswire (US) • 08/26/2024 05:00:00 PM
- Huntington Bancshares to Present at the 2024 Barclays Global Financial Services Conference • PR Newswire (US) • 08/20/2024 08:15:00 PM
- Huntington Bancshares Incorporated Declares Quarterly Cash Dividends On Its Common and Preferred Stocks • PR Newswire (US) • 07/19/2024 08:15:00 PM
- Huntington Private Bank wins two Wealth for Good Awards • PR Newswire (US) • 07/09/2024 01:00:00 PM
- Huntington Bancshares Incorporated Announces Second Quarter 2024 Earnings Call Details • PR Newswire (US) • 07/03/2024 12:00:00 PM
- ZRG Secures $120 Million in Debt Financing from Main Street Capital • GlobeNewswire Inc. • 06/19/2024 09:55:00 AM
- Huntington Bancshares Incorporated Declares Cash Dividend On Its Series I Preferred Stock • PR Newswire (US) • 06/18/2024 08:05:00 PM
- Update Regarding Huntington Bancshares Incorporated at the Morgan Stanley US Financials, Payments & CRE Conference • PR Newswire (US) • 06/10/2024 02:39:00 PM
- Huntington Bancshares to Present at the 2024 Morgan Stanley US Financials, Payments and CRE Conference • PR Newswire (US) • 05/31/2024 08:30:00 PM
- Capstone's Aerospace, Defense, Government & Security Group Reports: Sector Fundamentals Strengthen While M&A Activity Declines • PR Newswire (US) • 05/29/2024 03:20:00 PM
- Capstone Partners Reports: Female Executives Prioritize Market Expansion to Drive Business Growth, Show High Preparedness for M&A • PR Newswire (US) • 05/15/2024 05:39:00 PM
- The Huntington National Bank names Angie Klett President of Huntington Insurance, Inc. • PR Newswire (US) • 05/15/2024 01:00:00 PM
- The Joint Corp. Engages Capstone Partners to Accelerate Refranchising Efforts • GlobeNewswire Inc. • 05/13/2024 11:05:00 AM
- Huntington Bancshares Incorporated Declares Quarterly Cash Dividends On Its Common and Preferred Stocks • PR Newswire (US) • 04/19/2024 08:05:00 PM
- U.S. Index Futures Decline Amid Israel-Iran Tensions • IH Market News • 04/19/2024 11:32:51 AM
- Huntington Bancshares Incorporated Reports 2024 First-Quarter Earnings • PR Newswire (US) • 04/19/2024 10:30:00 AM
- Huntington Bancshares Incorporated Announces Earnings Release Dates for 2024 - 2026 • PR Newswire (US) • 04/04/2024 01:05:00 PM
- Huntington Bancshares Incorporated Declares Cash Dividend On Its Series I Preferred Stock • PR Newswire (US) • 03/28/2024 08:05:00 PM
- The Huntington National Bank Honored by Consumer Bankers Association for Commitment to Workforce Development • PR Newswire (US) • 03/28/2024 06:50:00 PM
- Huntington National Bank receives 2023 Greenwich Best Brand, Excellence Awards for middle market and business banking • PR Newswire (US) • 03/26/2024 12:30:00 PM
VHAI - Vocodia Partners with Leading Political Super PACs to Revolutionize Fundraising Efforts • VHAI • Sep 19, 2024 11:48 AM
Dear Cashmere Group Holding Co. AKA Swifty Global Signs Binding Letter of Intent to be Acquired by Signing Day Sports • DRCR • Sep 19, 2024 10:26 AM
HealthLynked Launches Virtual Urgent Care Through Partnership with Lyric Health. • HLYK • Sep 19, 2024 8:00 AM
Element79 Gold Corp. Appoints Kevin Arias as Advisor to the Board of Directors, Strengthening Strategic Leadership • ELMGF • Sep 18, 2024 10:29 AM
Mawson Finland Limited Further Expands the Known Mineralized Zones at Rajapalot: Palokas step-out drills 7 metres @ 9.1 g/t gold & 706 ppm cobalt • MFL • Sep 17, 2024 9:02 AM
PickleJar Announces Integration With OptCulture to Deliver Holistic Fan Experiences at Venue Point of Sale • PKLE • Sep 17, 2024 8:00 AM