Q4 2023 Huntington Bancshares Inc Earnings Call

January 19, 2024

Greetings and welcome to Huntington Bank Shares 2023 Fourth Quarter Earnings Review.

Greetings and welcome to Huntington Bank Shares' 2023 Fourth Quarter Earnings Review. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Tim Sedabres, Director of Investor Relations. Please go ahead.

Greetings and welcome to the Huntington Bancshares 2023 fourth quarter earnings review.

At this time, all participants are in listen-only mode.

At this time, all participants are in listen only mode.

A question and answer session will follow the formal presentation.

And the answer session will follow the formal presentation.

If anyone should require operator assistance during the conference.

If anyone should require operator assistance during the conference,

Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to Tim Sedabres, Director of Investor Relations. Please go ahead.

I would now like to turn the conference over to Tim Service Director of Investor Relations. Please go ahead.

Timothy R. Sedabres: Thank you, Operator. Welcome, everyone, and good morning. Copies of the slides we will be reviewing today can be found on the Investor Relations section of our website, www.huntington.com.

Tim: Thank you operator, welcome everyone and good morning.

Copies of the slides, we'll be reviewing today can be found on the Investor Relations section of our website Www Dot Huntington Dot com.

Timothy R. Sedabres: As a reminder, this call is being recorded and a replay will be available starting about one hour from the close of the call.

Tim: As a reminder, this call is being recorded and a replay will be available starting about one hour from the close of the call.

Timothy R. Sedabres: Our presenters today are Steve Steinour, Chairman, President, and CEO, and Zach Wasserman, Chief Financial Officer.

Tim: Our presenters today are Steve Stein, our chairman, President and CEO, Zach Wasserman, Chief Financial Officer.

Speaker Change: Brendan Lawler, Chief Credit Officer, will join us for the Q&A.

Speaker Change: Brian Lawlor, Chief Credit Officer will join us for the Q&A.

Speaker Change: Ernie's documents, which include our forward-looking statements, disclaimer, and non-GAAP information, are available on the Investor Relations section of our website. With that, let me now turn it over to Steve. Thanks, Tim. Good morning, everyone, and welcome. Thank you for joining the call today. We're pleased to announce our fourth quarter results, which Zach will detail later. These results are again supported by our colleagues across the bank, who live our purpose every day as we make people's lives better, help businesses thrive, and strengthen the communities we serve. Now on to slide four. There are five key messages we want to leave you with today. First, we are leveraging our position of strength and executing on our strategic growth initiatives. We are well positioned to benefit during times like these. We managed our capital levels to enable us to accelerate initiatives during 2023 and support continued growth.

Speaker Change: Earnings documents, which include our forward looking statements disclaimer and non-GAAP information are available on the Investor Relations section of our website.

Speaker Change: Let me now turn it over to Steve. Thanks, Tim Good morning, everyone and welcome. Thank you for joining our call today, we're pleased to announce our fourth quarter results, which Jack will detail. Later. These results are again supported by our colleagues across the bank who live our purpose every day as we make People's lives better help businesses thrive and strengthen.

Stephen D. Steinour: And the communities we serve now onto slide four there are five key messages, we want to leave you with today first we are leveraging our position of strength and executing on our strategic growth initiatives, we are well positioned to benefit during times like these we managed our capital levels to enable us to accelerate initiatives during <unk>.

Speaker Change: There are five key messages we want to leave you with today. First, we are leveraging our position of strength and executing on our strategic growth initiatives. We are well positioned to benefit during times like these. We managed our capital levels to enable us to accelerate initiatives during 2023 and support continued growth.

Stephen D. Steinour: Twenty-three and support continued growth we added key specialty verticals in commercial banking and expanded into the Carolinas.

Stephen D. Steinour: We added key specialty verticals in commercial banking and expanded into the Carolinas.

Stephen D. Steinour: We added key specialty verticals in commercial banking and expanded into the Carolinas. Additionally, we outperformed on both deposits and loans throughout the year. Our colleagues are acquiring new customers and deepening our existing customer relationships. Importantly, we delivered this growth while effectively managing our deposit beta.

Stephen D. Steinour: Second, we outperformed on both deposits and loans throughout the year. Our colleagues are acquiring new customers and deepening our existing customer relationship.

Stephen D. Steinour: Second we outperformed on both deposits and loans throughout the year, our colleagues are acquiring new customers and deepening our existing customer relationships importantly, we delivered this growth while effectively managing our deposit beta third we expect to modestly expand net interest income as we manage the challenges.

Stephen D. Steinour: Third, we expect to modestly expand net interest income as we manage the challenges of the interest rate cycle and are driving increased fee revenue. Fourth, we are rigorously managing credit across our portfolios, consistent with our aggregate moderate to low risk appetite. Credit trends are normalizing as expected, and we continue to believe we will outperform the industry on credit through the cycle. Finally, we remain intently focused on our core strategies.

Stephen D. Steinour: The interest rate cycle and are driving increased fee revenues fourth we are rigorously managing credit across our portfolios consistent with our aggregate moderate to low risk appetite.

Stephen D. Steinour: Fourth, we are rigorously managing credit across our portfolios, consistent with our aggregate moderate to low risk appetite.

Stephen D. Steinour: Credit trends are normalizing as expected, and we continue to believe we will outperform the industry on credit through the cycle. Finally, we remain intently focused on our core strategies.

Stephen D. Steinour: Credit trends are normalizing as expected and we continue to believe we will outperform the industry on credit through the cycle. Finally, we remain intently focused on our core strategies.

Stephen D. Steinour: Huntington remained resilient through the events of 2023, emerging as one of the strongest regional banks. We maintained our disciplined execution.

Stephen D. Steinour: Huntington remained resilient through the events of 2023, emerging as one of the strongest regional banks. We maintained our disciplined execution, and we expect to grow earnings over the course of 2024 and into 2025 and beyond. I will move us on to slide five to recap our performance in 2023. Huntington delivered solid results over the course of the year against a challenging backdrop. While the banking sector faced headwinds early in the year, Huntington emerged as a secular winner, gaining new customers, adding over $3 billion of deposit growth, and further bolstering our capital. We also increased loans by $2.5 billion for the full year, or 2%, while driving capital ratios higher.

Stephen D. Steinour: Clinton remain resilient through the events of 2023 emerging as one of the strongest regional banks, we maintained our disciplined execution.

Stephen D. Steinour: and we expect to grow earnings over the course of 2024 and continuing into 2025 and beyond. I will move us on to slide five to recap our performance in 2023.

Stephen D. Steinour: And we expect to grow earnings over the course of 'twenty, 'twenty, four and continuing into 2025 and beyond.

Stephen D. Steinour: We'll move us on to slide five to recap our performance in 2023 hunting.

Stephen D. Steinour: Huntington delivered solid results over the course of the year against a challenging backdrop.

Stephen D. Steinour: On the banking sector faced headwinds early in the year Huntington emerged as a secular winter gaining new customers, adding over $3 billion of deposit growth and further bolstering our capital.

Stephen D. Steinour: We also increased loans by $2.5 billion for the full year, or 2%, while driving capital ratios higher.

Stephen D. Steinour: We also increased loans by $2 $5 billion for the full year or 2%, while driving capital ratios higher we.

Stephen D. Steinour: We expect the pace of loan growth to accelerate in 2024. We added to our revenue base primarily as net interest income increased by 3.3% for the full year. We maintained our leadership in customer satisfaction and digital capabilities, having again been awarded the number one ranking by J.D. Power for both categories. We remained focused on executing our strategies, including growing consumer primary bank relationships by 3%. Additionally, we completed the realignment of business segments. We also delivered on efficiency initiatives, including Operation Accelerate.

Stephen D. Steinour: We expect the pace of loan growth to accelerate in 2024.

Stephen D. Steinour: We expect the pace of loan growth to accelerate in 2020 four.

Stephen D. Steinour: We added to our revenue base primarily as net interest income increased by 3.3% for the full year. We maintained our leadership in customer satisfaction and digital capabilities, having again been awarded the number one ranking by J.D. Power for both categories.

Stephen D. Steinour: We added to our revenue base, primarily as net interest income increased by 3.3% for the full year, we maintained our leadership in customer satisfaction and digital capabilities, having again been awarded the number one ranking by J D power for both categories. We remained focused on executing our strategies.

Stephen D. Steinour: We remained focused on executing our strategies, including growing consumer primary bank relationships by 3%.

Speaker Change: <unk> growing consumer primary bank relationships by 3% Adil.

Stephen D. Steinour: Additionally, we completed the realignment of business segments.

Speaker Change: Additionally, we completed the realignment of business segments, we also delivered on efficiency initiatives, including operation accelerate.

Stephen D. Steinour: We also delivered on efficiency initiatives, including Operation Accelerate.

Stephen D. Steinour: The Voluntary Retirement Program

Stephen D. Steinour: The Voluntary Retirement Program Staffing Efficiency, Business Process Offshoring, and Branch and Other Real Estate Consolidation

Speaker Change: The voluntary retirement program staffing efficiencies.

Stephen D. Steinour: Staffing Efficiency

Stephen D. Steinour: Business Process Offshoring, and Branch and Other Real Estate Consolidation.

Speaker Change: Business process, Offshoring and branch and other real estate consolidations.

Stephen D. Steinour: We were nimble and opportunistic, adding key talent this past year with the addition of three new specialty commercial banking verticals.

Stephen D. Steinour: We were nimble and opportunistic, adding key talent this past year with the addition of three new specialty commercial banking verticals. We also expanded our commercial and regional bank into the Carolinas, adding experienced teams in these attractive and high-growth markets. Additionally, we further strengthened our balance sheet and drove capital ratios higher over the course of the year. We are getting ahead of proposed industry requirements. And finally, credit was managed exceptionally well with full-year net charge-offs of 23 basis points.

Speaker Change: We were nimble and opportunistic adding key talent. This past year with the addition of three new specialty commercial banking verticals.

Stephen D. Steinour: We also expanded our commercial and regional bank into the Carolinas, adding experienced teams in these attractive and high-growth markets.

Speaker Change: We also expanded our commercial and regional bank into the Carolinas, adding experienced teams in these attractive and high growth markets.

Stephen D. Steinour: Additionally, we further strengthened our balance sheet and drove capital ratios higher over the course of the year. We are getting ahead of proposed industry requirements.

Speaker Change: Additionally, we further strengthened our balance sheet and drove capital ratios higher over the course of the year. We're getting ahead of proposed industry requirements.

Stephen D. Steinour: And finally, credit was managed exceptionally well with full-year net charge-offs of 23 basis.

Speaker Change: And finally credit was managed exceptionally well with full year net charge offs of 23 basis points move.

Stephen D. Steinour: Moving to slide six.

Speaker Change: Moving to slide six.

Stephen D. Steinour: Looking ahead to 2024, we have a clear set of objectives.

Stephen D. Steinour: Looking ahead to 2024, we have a clear set of objectives. We will leverage our position of strength to increase growth of both deposits and loans. This outlook will result in accelerated revenue growth and is further bolstered by fee opportunities. This posture, coupled with our dynamic balance sheet management and hedging programs, is expected to benefit the revenue and profitability outlook for 2024 and further expand into 2025 and beyond. This aligns with the improving macro backdrop, the higher probability of continued GDP growth, and the avoidance of a hard landing.

Speaker Change: Looking ahead to 2020 four we have a clear set of objectives, we will leverage our position of strength to increase growth of both deposits and loans.

Stephen D. Steinour: We will leverage our position of strength to increase growth of both deposits and loans.

Stephen D. Steinour: This outlook will result in accelerated revenue growth and is further bolstered by fee opportunities.

Speaker Change: This outlook will result in accelerated revenue growth and has further bolstered by fee opportunities.

Stephen D. Steinour: This posture, coupled with our dynamic balance sheet management and hedging programs, is expected to benefit the revenue and profitability outlook for 2024 and further expand into 2025 and beyond. This aligns with the improving macro backdrop, the higher probability of continued GDP growth, and the avoidance of a hard landing.

Speaker Change: This posture, coupled with our dynamic balance sheet management and hedging programs is expected to benefit the revenue and profitability outlook for 'twenty 'twenty four and further expand into 'twenty 'twenty five and beyond this aligns with the improving macro backdrop, the higher probability of continued GDP growth and the avoid.

Stephen D. Steinour: While we deliver this accelerated growth, we will continue to maintain our aggregate moderate to low risk appetite.

Speaker Change: <unk> of a hard landing.

Stephen D. Steinour: While we deliver this accelerated growth, we will continue to maintain our aggregate moderate to low risk appetite.

Speaker Change: While we deliver this accelerated growth we will continue to maintain our aggregate moderate to low risk appetite.

Speaker Change: Zach, over to you to provide more detail on our financial performance.

Speaker Change: Zach, it is over to you to provide more detail on our financial performance.

Speaker Change: <unk> over to you to provide more detail on our financial performance.

Zachary J. Wasserman: Thanks, Steve, and good morning, everyone.

Zachary J. Wasserman: Thanks, Steve, and good morning, everyone. Slide 7 provides highlights of our fourth quarter results.

Speaker Change: Thanks, Steve and good morning, everyone Slide seven provides highlights of our fourth quarter results. We reported GAAP earnings per common share of <unk> 15 cents and adjusted EPS of twenty-seven sense. The quarter included $226 million of notable items, primarily related to the FDIC special assessment, which <unk>.

Zachary J. Wasserman: Slide 7 provides highlights of our fourth quarter results.

Stephen D. Steinour: We reported GAAP earnings per common share of 15 cents and adjusted EPS of 27 cents.

Stephen D. Steinour: We reported GAAP earnings per common share of 15 cents and adjusted EPS of 27 cents. The quarter included $226 million of notable items, primarily related to the FDIC special assessment, which impacted EPS by 12 cents per common share. Additionally, the termination of the pay-fixed swaption hedging program impacted pre-tax income by $74 million, or four cents per share. Return on Tangible Common Equity, or ROTCE, came in at 8.4% for the quarter. Adjusted for notable items, ROTCE was 15.1%.

Stephen D. Steinour: The quarter included $226 million of notable items.

Stephen D. Steinour: primarily related to the FDIC special assessment, which impacted EPS by 12 cents per common share.

Speaker Change: Packed with E. P. S by 12 cents per common share. Additionally.

Stephen D. Steinour: Additionally, the termination of the pay-fixed swaption hedging program impacted pre-tax income by $74 million, or four cents per share.

Speaker Change: Additionally, the termination of the pay fixed swaps and hedging program impacted pretax income by $74 million or four cents per share.

Stephen D. Steinour: Return on Tangible Common Equity, or ROTCE, came in at 8.4% for the quarter.

Speaker Change: Return on tangible common equity or R. O T. C E came in at 8.4% for the quarter.

Stephen D. Steinour: Average deposits continued their trend of growth into the fourth quarter, increasing by $1.5 billion, or 1%. Cumulative deposit beta totaled 41% through year-end. The loan balance has increased by $445 million as we continue to optimize the pace of loan growth to drive the highest return on capital. Credit quality remains strong. The trend is normalizing, consistent with our expectations, and net charge-offs totaled 31 basis points. The allowance for credit losses ended the quarter at 1.97%.

Stephen D. Steinour: Adjusted for notable items, ROTCE was 15.1%. Average deposits continued their trend of growth into the fourth quarter, increasing by $1.5 billion, or 1%. Cumulative deposit beta totaled 41% through year-end.

Speaker Change: Adjusted for notable items R. O T. C. He was 15.1% average deposits continued their trend of growth into the fourth quarter, increasing by $1.5 billion or 1% cumulative deposit beta totaled 41% through year end.

Loan balances increased by $445 million as we continue to optimize the pace of loan growth to drive the highest return on capital.

Stephen D. Steinour: Loan balance has increased by $445 million as we continue to optimize the pace of loan growth to drive the highest return on capital.

Stephen D. Steinour: Credit quality remains strong. The trend is normalizing, consistent with our expectations, and net charge-offs totaled 31 basis points.

Speaker Change: Credit quality remains strong the trend is normalizing consistent with our expectations and net charge offs totaled 31 basis points.

Stephen D. Steinour: Allowance for credit losses ended the quarter at 1.97%.

Speaker Change: Allowance for credit losses ended the quarter at 1.97%.

Stephen D. Steinour: Turning to slide 8. As I noted, average loan balances increased quarter over quarter and were higher by 2% year over year. We expect the pace of future loan growth to accelerate over the course of 2024.

Stephen D. Steinour: Turning to slide 8, as I noted, average loan balances increased quarter over quarter and were higher by 2% year over year. We expect the pace of future loan growth to accelerate over the course of 2024. Total commercial loans increased by $125 million for the quarter and included distribution finance, which increased by $225 million, benefiting from normal seasonality as manufacturer shipments increased due to inventory build of winter products, auto floor plan, which increased by $359 million, and CRE balances, which declined by $361 million, including the impact of payoffs and normal amortization. And all other commercial categories net decreased as we continued to drive optimization toward the highest return. In consumer, growth was led by residential mortgage, which increased by $295 million, and RV Marine, which increased by $121 million, while auto loan balances declined for the quarter.

Speaker Change: Turning to slide eight.

Speaker Change: As I noted average loan balances increased quarter over quarter and were higher by 2% year over year, we expect the pace of future loan growth to accelerate over the course of 'twenty 'twenty four.

Stephen D. Steinour: Total commercial loans increased by $125 million for the quarter and included distribution finance, which increased by $225 million, benefited by normal seasonality as manufacturer shipments increased due to inventory build of winter products.

Speaker Change: Total commercial loans increased by $125 billion for the quarter and included distribution finance, which increased by $225 million benefited by normal seasonality as manufacturer shipments increased due to inventory build of winter products auto floor plan increased by $359 million.

Stephen D. Steinour: auto floor plan increased by $359 million.

Stephen D. Steinour: and CRE balances, which declined by $361 million, including the impact of payoffs and normal amortization. And all other commercial categories net decreased as we continued to drive optimization toward the highest return.

Speaker Change: <unk> and CRE balances, which declined by $361 million, including the impact of payoffs and normal amortization and all other commercial categories net decreased as we continue to drive optimization toward the highest returns in.

Stephen D. Steinour: In consumer, growth was led by residential mortgage, which increased by $295 million, and RV Marine, which increased by $121 million, while auto loan balances declined for the quarter. Turning to slide 9, as noted, we continued to gather deposits consistently in the fourth quarter.

Speaker Change: In consumer growth was led by residential mortgage which increased by $295 million in RV marine which increased by $121 million, while auto loan balances declined for the quarter turning to slide nine as noted we continued to gather deposits consistently in the fourth quarter average deposits.

Stephen D. Steinour: Turning to slide 9, as noted, we continued to gather deposits consistently in the fourth quarter. Average deposits increased by $1.5 billion, or 1% from the prior quarter. Turning to slide 10.

Stephen D. Steinour: Average deposits increased by $1.5 billion, or 1% from the prior quarter.

Speaker Change: Increased by $1.5 billion or 1% from the prior quarter turning to slide 10.

Stephen D. Steinour: Turning to slide 10.

Stephen D. Steinour: Growth was maintained each month throughout the fourth quarter, continuing the recent trend.

Stephen D. Steinour: Growth was maintained each month throughout the fourth quarter, continuing the recent trend. Total cumulative deposit beta ended the year at 41%, in line with our expectations and reflecting the decelerating rate of change we would expect at this point in the rate cycle. As we've noted in the past, where beta ultimately tops out will be a function of the end game for the rate cycle in terms of the level and timing of the peak and the duration of any extended pause before a decrease.

Speaker Change: Growth was maintained each month throughout the fourth quarter continuing the recent trend.

Stephen D. Steinour: Total cumulative deposit beta end of the year at 41% in line with our expectations.

Speaker Change: Total cumulative deposit beta ended the year at 41% in line with our expectations and reflecting the decelerating rate of change we would expect at this point in the rate cycle.

Stephen D. Steinour: and reflecting the decelerating rate of change we would expect at this point in the rate cycle.

Stephen D. Steinour: As we've noted in the past, where beta ultimately tops out will be a function of the end game for the rate cycle in terms of the level and timing of the peak and the duration of any extended pause before a decrease.

Speaker Change: As we've noted in the past we're in beta ultimately tops out will be a function of the end game for the rate cycle in terms of the level and timing of the peak and the duration of any extended pause before a decrease.

Stephen D. Steinour: Given market expectations for rate cuts to start sometime in 2024, our current outlook for deposit beta remains unchanged, trending a few percentage points higher and then beginning to revert and fall if and when we see rate cuts from the Fed. When interest rate cuts commence, we expect to manage betas on the way down with the same discipline as we have during increasing rates on the way up.

Speaker Change: Given market expectations for rate cuts to start sometime in 2020 for our current outlook for deposit beta remains unchanged trending a few percentage points higher and then beginning to revert and fall if and when we see rate cuts from the fed when interest rate cuts commence we expect to manage betas on the way down with the same discipline.

Stephen D. Steinour: When interest rate cuts commence, we expect to manage betas on the way down with the same discipline as we have during the increasing rates on the way up.

Speaker Change: We have during the increasing rate cycle, turning to slide 11.

Stephen D. Steinour: Turning to slide 11.

Stephen D. Steinour: Turning to slide 11, the non-interest-bearing mix shift continues to track closely to our forecast with a deceleration of sequential changes. The non-interest-bearing percentage decreased by 80 basis points from the third quarter, and we continue to expect this mixed shift to moderate and stabilize during 2024. Now to slide 12. For the quarter, net interest income decreased by $52 million, or 3.8%, to $1,327,000,000. The interest margin declined sequentially to 3.07%, in line with our forecast. We have benefited from our asset sensitivity and the expansion of margins, with net interest revenues growing at an 8% CAGR over the past two years.

Stephen D. Steinour: Non-interest-bearing mix shift continues to track closely to our forecast with deceleration of sequential changes.

Speaker Change: Noninterest bearing mix shift continues to track closely to our forecast with deceleration of sequential changes.

Stephen D. Steinour: The non-interest-bearing percentage decreased by 80 basis points from the third quarter, and we continue to expect this mixed shift to moderate and stabilize during 2024.

Speaker Change: The noninterest bearing percentage decreased by 80 basis points from the third quarter and we continue to expect this mix shift to moderate and stabilize during 2024.

Stephen D. Steinour: On to slide 12.

Speaker Change: Onto slide 12.

Stephen D. Steinour: For the quarter, net interest income decreased by $52 million, or 3.8%, to $1,327,000,000.

Speaker Change: For the quarter net interest income decreased by $52 million or three 8% to $1.327 billion net.

Stephen D. Steinour: That interest margin declines sequentially to 3.07% in line with our forecast.

Speaker Change: Net interest margin declined sequentially to 3.07% in line with our forecast.

Stephen D. Steinour: Reconciling the change in NIMH from Q3, we saw a decrease of 13 basis points for NIMH from Q3 to Q4. This was primarily due to a lower spread net of free funds, which accounted for nine basis points, along with a two basis point negative impact from lower FHLB stock dividends and a two basis point reduction from hedging.

Stephen D. Steinour: We have benefited from our asset sensitivity and the expansion of margins, with net interest revenues growing at an 8% CAGR over the past two years.

Speaker Change: Cumulatively over the cycle, we have benefited from our asset sensitivity and the expansion of margins with net interest revenues growing at an 8% CAGR over the past two years.

Stephen D. Steinour: Reconciling the change in NIMH from Q3, we saw a decrease of 13 basis for NIMH from Q3 to Q4.

Speaker Change: Reconciling the change in NIM from Q3, we saw a decrease of 13 basis points. This was primarily.

Stephen D. Steinour: This was primarily due to lower spread net of free funds, which accounted for nine basis points, along with a two basis point negative impact from lower FHLB stock dividends and a two basis point reduction from hedging.

Merely due to lower spread net of free funds, which accounted for nine basis points, along with a two basis point negative impact from lower F. H L. B stock dividends and a two basis point reduction from hedging.

Stephen D. Steinour: Turning to slide 13, let me share a few added thoughts around the fixed rate loan repricing opportunity that will benefit us over the moderate term. The constructed or balance sheet is approximately half fully variable rate.

Stephen D. Steinour: Turning to slide 13, let me share a few added thoughts around the fixed rate loan repricing opportunity that will benefit us over the moderate term.

Speaker Change: Turning to slide 13, let me share a few added thoughts are on the fixed rate loan repricing opportunity that will benefit us over the moderate term the.

Stephen D. Steinour: The constructed or balance sheet is approximately half fully variable rate.

Speaker Change: The cost structure of our balance sheet is approximately half fully variable rate, 10% and indirect auto which is a shorter approximately two year average life and 10% in arms with a four year average life.

Speaker Change: Thank you for joining us.

Speaker Change: The remainder of approximately 30% is longer average life fixed

Speaker Change: The remainder of approximately 30% is longer average life fixed assets. We have seen notable increases in fixed asset portfolio yields thus far in the rate cycle. Even as the forward curve forecasts lower short-term rates, many of our fixed-rate loan portfolios retain substantial upside repricing opportunity for some time to come. We forecast approximately $13 to $15 billion of fixed-rate loan repricing opportunity in 2024, with an estimated yield benefit of approximately 350 basis points.

Speaker Change: The remainder of approximately 30% is longer average life fixed rate.

Speaker Change: We have seen notable increases in fixed asset portfolio yields thus far in the rate cycle.

Speaker Change: We've seen notable increases in fixed asset portfolio yields thus far in the rate cycle.

Speaker Change: Even as the forward curve forecasts lower short-term rates, many of our fixed-rate loan portfolios retain substantial upside repricing opportunity for some time to come.

Speaker Change: Even as the forward curve forecast lower short term rates many of our fixed rate loan portfolios retains substantial upside repricing opportunity for sometime to come.

Speaker Change: We forecast approximately $13 to $15 billion of fixed-rate loan repricing opportunity in 2024, with an estimated yield benefit of approximately 350 basis dollars.

Speaker Change: We forecast approximately $13 billion to $15 billion of fixed rate loan repricing opportunity in 'twenty 'twenty four with an estimated yield benefit of approximately 350 basis points.

Speaker Change: Slide 14 provides the drivers of our spread revenue growth.

Speaker Change: Slide 14 provides the drivers of our spread revenue growth. As a reminder, we continue to analyze and develop action plans for a wide range of potential economic and interest rate scenarios. The basis of our planning and guidance continues to be a central set of those scenarios that is bounded on the lower end by a scenario that includes five rate cuts in 2024. The higher scenario assumes rates stay higher for longer and tracks closely with the Fed's dot plot from year end. This scenario assumes three cuts in 2024. We continue to be focused on managing net interest margin on a tight chord.

Speaker Change: Slide 14 provides the drivers of our spread revenue growth as a reminder, we continue to analyze and develop action plans for a wide range of potential economic and interest rate scenarios.

Speaker Change: As a reminder, we continue to analyze and develop action plans for a wide range of potential economic and interest rate scenarios.

Speaker Change: The basis of our planning and guidance continues to be a central set of those scenarios that is bounded on the lower end by a scenario which includes five rate cuts in 2024. The higher scenario assumes rates stay higher for longer and tracks closely with the Fed's dot plot from year end. This scenario assumes three cuts in 2024.

Speaker Change: The basis of our planning and guidance continues to be a central set of those scenarios that is bounded on the lower end by a scenario, which includes five rate cuts in 2020 for the higher scenario assumes rates stay higher for longer and tracks closely with the fed's Dot plot from year end this scenario assumes <unk>.

Speaker Change: Three cuts in 'twenty 'twenty four we continued to be focused on managing net interest margin in a tight corridor.

Speaker Change: We continue to be focused on managing net interest margin in a tight chord.

Speaker Change: Should the lower rate scenario play out and we see rate cuts as early as March, that will likely result in a margin over the course of the year within a range near the level we saw in the fourth quarter. This would equate to a net interest margin between 3% and 3.1% for each quarter of 2024. If the higher-for-longer scenario comes to pass, we expect the margin to expand, and at a level that is up to 10 basis points above that. As we saw in December, the outlook for longer-term interest rates also moved lower significantly.

Speaker Change: Should the lower rate scenario play out and we see rate cuts as early as March that will likely result in a margin over the course of the year within a range near the level. We saw in the fourth quarter. This would equate to net interest margin between 3% and 3.1% for each quarter of 'twenty 'twenty four.

Speaker Change: This would equate to an net interest margin between 3% and 3.1% for each quarter of 2024.

Speaker Change: If the higher-for-longer scenario comes to pass, we expect the margin to expand, and at a level that is up to 10 basis points above that. As we saw in December, the outlook for longer-term interest rates also moved lower significantly.

Speaker Change: If the higher for longer scenario comes to pass we expect the margin to expand and at a level that is up to 10 basis points above that as we saw in December the outlook for longer term interest rates also moved lower significantly there were a number of benefits from this lower market rate outlook.

Speaker Change: There were a number of benefits from this lower market rate outlook.

Speaker Change: There were a number of benefits from this lower market rate outlook. First, it resulted in higher capital levels.

Speaker Change: First, it resulted in higher capital levels

Speaker Change: First it resulted in higher capital levels, given a OCI accretion, which supports our accelerated loan growth outlook now.

Speaker Change: Given AOCI accretion, which supports our accelerated loan growth outlook now.

Speaker Change: Given AOCI accretion, which supports our accelerated loan growth outlook now. And second, it provides for easing deposit competition over time. Third, it provides credit support for borrowers with the potential to lock in lower long-term rates. However, the rate outlook is incrementally more challenging for full-year spread revenue than the levels we had seen underlying our guidance in December. Net of these items, including the forecasted pace of loan growth, we now expect net interest income on a dollar basis.

Speaker Change: Second, it provides for easing deposit competition over time.

Speaker Change: Second it provides for easing deposit competition over time.

Speaker Change: Third, it provides credit support for borrowers with the potential for locking in lower long-term rates. However, the rate outlook is incrementally more challenging for full-year spread revenue than the levels we had seen underlying our guidance in December.

Speaker Change: Third it provides credit support for borrowers with the potential for locking in lower long term rates. However, the rate outlook is incrementally more challenging for full year spread revenue than the levels, we had seen underlying our guidance in December.

Speaker Change: Net of these items, including the forecasted pace of loan growth, we now expect net interest income on a dollar basis.

Speaker Change: Net of these items, including the forecasted pace of loan growth. We now expect net interest income on a dollar basis to trough in the first quarter before expanding sequentially from that level over the course of the year turning to slide 15, our contingent and available liquidity continues to be robust at $93 billion.

Speaker Change: To trough in the first quarter before expanding sequentially from that level over the course of the year. Turning to slide 15, our contingent and available liquidity continues to be robust at $93 billion and has grown quarter over quarter. At quarter end, we continue to benefit from a diverse and highly granular deposit base with 70% insured deposit.

Speaker Change: And has grown quarter over quarter at quarter end, we continue to benefit from a diverse and highly granular deposit base with 70% insured deposits our pool of available liquidity represented 206% of total uninsured deposits our peer leading coverage.

Speaker Change: Our pool of available liquidity represented 206% of total uninsured deposits appear leading coverage.

Speaker Change: Our pool of available liquidity represented 206% of total uninsured deposits, which appears to be leading coverage.

Speaker Change: Turning to slide 16, our level of cash and securities at year-end increased as we've begun to reinvest portfolio cash flows during the fourth quarter. This investment strategy is consistent with our approach to continue to manage the unhedged duration of the portfolio lower over time. We have reduced the overall hedge duration of the portfolio from 4.1 years to 3.7 years over the past 18 months. Turning to slide 17.

Speaker Change: Turning to slide 16, our level of cash and securities at year end increased as we've begun to reinvest portfolio cash flows during the fourth quarter. This investment strategy is consistent with our approach to continue to manage the unhedged duration of the portfolio lower over time.

Speaker Change: We have reduced overall hedge duration of the portfolio from 4.1 years to 3.7 years over the past 18 months.

Speaker Change: We have reduced overall hedge duration of the portfolio from 4.1 years to 3.7 years over the past 18 months turning to slide 17, we've updated our forecast for the recapture of a OCI.

Speaker Change: Turning to slide 17.

Speaker Change: We've updated our forecast for the recapture of AOCI.

Speaker Change: We've updated our forecast for the recapture of AOCI. As of year end, we've recaptured 26% of total AOCI from the peak level on September 30th. Using market rates at year end, we would recapture an estimated 44% of AOCI over the next three years.

Speaker Change: As of year end, we've recaptured 26% of total AOCI from the peak level at September 30th.

Speaker Change: As of year end, we've recaptured 26% of total OCI from the peak level at September 30th using market rates at year end, we would recapture an estimated incremental 44% of a OCI over the next three years.

Speaker Change: Using market rates at year end, we would recapture an estimated incremental 44% of AOCI over the next three years.

Speaker Change: Turning to slide 18.

Speaker Change: Turning to slide 18, we continued to be dynamic and positioning our hedging program as the rate outlook changed over the course of the fourth quarter, we focused our objective incrementally on the protection of NIM in down rate scenarios and actively reduced instruments that were intended to protect capital and up rate scenarios.

Speaker Change: We continued to be dynamic in positioning our hedging program.

Speaker Change: We continued to be dynamic in positioning our hedging program. As the rate outlook changed over the course of the fourth quarter, we focused our objective incrementally on the protection of NIM in downrate scenarios and actively reduced instruments that were intended to protect capital in uprate scenarios. As we announced in late December, we terminated the pay fixed swaptions program as our assessment of the probability of substantial upgrade moves decreased. However, over the course of Q2 through Q4, this program worked as intended, providing significant protection against possible tail risk uprate moves with a modest overall cost for that insurer.

Speaker Change: As the rate outlook changed over the course of the fourth quarter, we focused our objective incrementally on the protection of NIM in downrate scenarios and actively reduced instruments that were intended to protect capital in uprate scenarios.

Speaker Change: As we announced in late December, we terminated the pay fixed swaptions program as our assessment of the probability for substantial upgrade moves decreased.

As we announced in late December we terminated the pay fixed swap <unk> program as our assessment of the probability for substantial upgrade moves decreased.

Speaker Change: Over the course of Q2 through Q4, this program worked as intended, providing significant protection against possible tail risk uprate moves.

Operator: Greetings and welcome to Huntington Bank Shares' 2023 Fourth Quarter Earnings Review. At this time, all participants are in listen-only mode.

Speaker Change: Over the course of Q2 through Q4. This program worked as intended providing significant protection against possible tail risk uprate moves with a modest overall cost for that insurance.

Speaker Change: Additionally, during the quarter, we added to our downrate NIM protection strategy by adding $2.1 billion of forward starting receive fixed swaps and adding $1 billion of floor spread. We exited $2 billion of callers that were near expiration. Our objective with respect to our downrate hedging activities remains unchanged to support the management of the net interest margin in as tight a range as possible.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Tim Sedabres, Director of Investor Relations. Please do so.

Speaker Change: with a modest overall cost for that insurer.

Speaker Change: Additionally, during the quarter, we added to our downrate NIM protection strategy.

Speaker Change: Additionally, during the quarter, we added to our Downrate NIM protection strategies, adding $2.1 billion of forward, starting receive fixed swaps and adding $1 billion of floor spreads, we exited $2 billion of colors, which were near exploration.

Speaker Change: Adding $2.1 billion of forward starting receive fixed swaps and adding $1 billion of floor spread.

Speaker Change: We exited $2 billion of callers, which were near expiration.

Timothy R. Sedabres: Thank you, Operator. Welcome, everyone, and good morning. Copies of the slides we will be reviewing today can be found in the Investor Relations section of our website, www.huntington.com. As a reminder, this call is being recorded, and a replay will be available starting about one hour from the end of the call. Our presenters today are Steve Steinour, Chairman, President, and CEO, and Zach Wasserman, Chief Financial Officer. Brendan Lawler, Chief Credit Officer, will join us for the Q&A. Ernie's documents, which include our forward-looking statements, disclaimer, and non-GAAP information, are available on the Investor Relations section of our website. With that said, let me now turn it over to Steve. Thanks, Tim. Good morning, everyone, and welcome.

Speaker Change: Our objective with respect to our downrate hedging activities remains unchanged to support the management of net interest margin in as tight a range as possible.

Our objective with respect to our downright hedging activities remains unchanged to support the management of net interest margin and a tighter range as possible moving on to slide 19, our fee growth strategy remains centered on three key areas capital markets payments and wealth management.

Speaker Change: Moving on to slide 90.

Speaker Change: Moving on to slide 90, our fee growth strategies remain centered on three key areas: capital markets, payments, and wealth management. Note this quarter in our earnings materials, we've updated the presentation of our non-interest income categories in order to more clearly highlight our strategic areas of focus and more closely align to the way we manage the business. Slide 35 in the appendix provides further detail on the components of each line item. These three key focus areas for fee growth collectively represent 63% of total non-interest income. We're seeing positive underlying growth in each of these areas.

Speaker Change: Our fee growth strategies remain centered on three key areas, capital markets, payments, and wealth management.

Speaker Change: Note this quarter in our earnings materials, we've updated the presentation of our non-interest income categories in order to more clearly highlight our strategic areas of focus and more closely align to the way we manage the business.

Speaker Change: Note this quarter in our earnings materials, we've updated the presentation of our noninterest income categories in order to more clearly highlight our strategic areas of focus and more closely aligned to the way we manage the business slide 35 in the appendix provides further detail on the components of each line item.

Speaker Change: Slide 35 in the appendix provides further detail on the components of each line item.

Stephen D. Steinour: Thank you for joining us today. We're pleased to announce our fourth quarter results, which Zach will detail later. These results are again supported by our colleagues across the bank, who live our purpose every day as we make people's lives better, help businesses thrive, and strengthen the communities we serve. Now on to slide four. There are five key messages we want to leave you with today.

Speaker Change: These three key focus areas for fee growth collectively represent 63% of total non-interest income.

Speaker Change: These three key focus areas for fee growth collectively represent 63% of total noninterest income.

Speaker Change: We're seeing positive underlying growth in each of these areas.

We're seeing positive underlying growth in each of these areas.

Speaker Change: In Capital Markets, we're pleased that revenues expanded sequentially. Thank you.

Speaker Change: In Capital Markets, we're pleased that revenues expanded sequentially. Thank you. Both advisory and core bank capital market products grew in the quarter. Our outlook is constructive for 2024, and we expect capital markets to remain a key driver of fee revenue growth over the medium term.

Speaker Change: In capital markets. We're pleased that revenues expanded sequentially, both advisory and core bank capital market products grew in the quarter. Our outlook is constructive for 'twenty 'twenty four and we expect capital markets to remain a key driver for fee revenue growth over the medium term.

Speaker Change: Both advisory and core bank capital market products grew in the quarter.

Speaker Change: Our outlook is constructive for 2024, and we expect capital markets to remain a key driver for fee revenue growth over the medium term.

Stephen D. Steinour: First, we are leveraging our position of strength and executing on our strategic growth initiatives. We are well positioned to benefit during times like these. We managed our capital levels to enable us to accelerate initiatives during 2023 and support continued growth. We added key specialty verticals in commercial banking and expanded into the Carolinas. Second, we outperformed on both deposits and loans throughout the year. Our colleagues are acquiring new customers and deepening our existing customer relationships.

Speaker Change: Payments and cash management revenue includes debit and credit card revenues along with treasury management and merchant processing.

Speaker Change: Payments and cash management revenue includes debit and credit card revenues along with treasury management and merchant processing. Our payments opportunity is substantial, reflecting 31% of total fee revenues today, with the potential for significant growth over time.

Speaker Change: Payments and cash management revenue includes debit and credit card revenues, along with Treasury management and merchant processing, our payments opportunity is substantial reflecting 31% of total fee revenues today with the potential for significant growth over time.

Speaker Change: Our payments opportunity is substantial, reflecting 31% of total fee revenues today, with the potential for significant growth over time.

Speaker Change: Wealth and Asset Management Revenue has benefited from the realignment earlier this year, which brought together our private bank and retail advisory businesses under one umbrella.

Speaker Change: Wealth and Asset Management revenue has benefited from the realignment earlier this year, which brought together our private bank and retail advisory businesses under one umbrella. Our advisory penetration rate of the customer base continues to increase as wealth advisory households have grown 11% year over year, and assets under management are up 16% from a year ago.

Speaker Change: Wealth and asset management revenue has benefited from the realignment earlier this year, which brought together our private bank and retail advisory businesses under one umbrella.

Stephen D. Steinour: Importantly, we delivered this growth while effectively managing our deposit beta. Third, we expect to modestly expand net interest income as we manage the challenges of the interest rate cycle and are driving increased fee revenue. Fourth, we are rigorously managing credit across our portfolios, consistent with our aggregate moderate to low risk appetite. Credit trends are normalizing as expected, and we continue to believe we will outperform the industry on credit through the cycle. Finally, we remain intently focused on our core strategies. Huntington remained resilient through the events of 2023, emerging as one of the strongest regional banks.

Speaker Change: Our advisory penetration rate of the customer base continues to increase as wealth advisory households have grown 11% year over year and assets under management are up 16% from a year ago.

Speaker Change: Moving on to slide 20.

Speaker Change: Moving on to slide 20, on an overall level, GAAP non-interest income decreased 104 million dollars to $405 million for the fourth quarter. Excluding the mark-to-market on the pay-fix swaptions and the CRT premium, fees increased by $5 million quarter-over-quarter.

Moving on to slide 20.

Speaker Change: On an overall level, GAAP non-interest income decreased 104 million dollars,

Speaker Change: On an overall level GAAP noninterest income decreased $104 million.

Speaker Change: to $405 million for the fourth quarter.

Two $405 million for the fourth quarter.

Speaker Change: Excluding the mark-to-market on the pay-fix swaptions and the CRT premium, fees increased by $5 million quarter-over-quarter.

Speaker Change: Excluding the mark to market on the pay fixed swap <unk> and the CRT premium fees increased by $5 million quarter over quarter.

Speaker Change: Moving on to slide 21, Unexpensive.

Speaker Change: Moving on to slide 21, Unexpensive. Gap's non-interest expense increased by $258 million, and underlying core expenses increased by $47 million. As I mentioned, we incurred $226 million of notable item expenses related primarily to the FDIC Deposit Insurance Fund Special Assessment during the quarter. It also included the last portion of costs related to our staffing efficiency program and corporate real estate consolidation. Excluding these items, core expenses included higher personnel and professional services driven by seasonally higher benefits expense, incentives, as well as consulting expense. The level of expenses we saw in the fourth quarter is largely consistent with the dollar amount we expect quarterly over the course of 2024. This is inclusive of the investments we've discussed previously, as well as sustained efficiencies we are driving across the company.

Speaker Change: Moving onto slide 21 unexpected <unk>.

Speaker Change: Gap non-interest expense increased by $258 million and underlying core expenses increased by $47 million.

Speaker Change: GAAP noninterest expense increased by $258 million and underlying core expenses increased by $47 million.

Stephen D. Steinour: We maintained our disciplined execution, and we expect to grow earnings over the course of 2024 and continue into 2025 and beyond. I will move us on to slide five to recap our performance in 2023. Huntington delivered solid results over the course of the year against a challenging backdrop.

Speaker Change: As I mentioned, we incurred $226 million of notable item expenses related primarily to the FDIC Deposit Insurance Fund Special Assessment during the quarter.

Speaker Change: As I mentioned, we incurred $226 million of notable item expenses related primarily to the FDIC deposit insurance fund a special assessment during the quarter.

Speaker Change: It also included the last portion of costs related to our staffing efficiency program and corporate real estate consolidation.

Speaker Change: It also included the last portion of costs related to our staffing efficiency program and corporate real estate consolidations.

Stephen D. Steinour: While the banking sector faced headwinds early in the year, Huntington emerged as a secular winner, gaining new customers, adding over $3 billion of deposit growth, and further bolstering our capital. We also increased loans by $2.5 billion for the full year, or 2%, while driving capital ratios higher. We expect the pace of loan growth to accelerate in 2024. We added to our revenue base primarily as net interest income increased by 3.3% for the full year. We maintained our leadership in customer satisfaction and digital capabilities, having again been awarded the number one ranking by J.D. Power for both categories.

Speaker Change: Excluding these items, core expense included higher personnel and professional services driven by seasonally higher benefits expense, incentives, as well as consulting expense.

Excluding these items core expense included higher personnel and professional services driven by seasonally higher benefits expense incentives as well as consulting expenses.

Speaker Change: The level of expenses we saw in the fourth quarter is largely consistent with the dollar amount we expect quarterly over the course of 2024. This is inclusive of the investments we've discussed previously, as well as sustained efficiencies we are driving across the company.

Speaker Change: The level of expenses, we saw in the fourth quarter is largely consistent with the dollar amount we expect quarterly over the course of 'twenty 'twenty. Four this is inclusive of the investments we've discussed previously as well as sustained efficiencies we are driving across the company.

Speaker Change: Slide 22 recaps our capital position. Reported common equity tier one increased to 10.3% and has increased sequentially for five quarters. Our adjusted CET1 ratio, inclusive of AOCI, was 8.6%. This metric increased 58 basis points compared to the prior quarter.

Speaker Change: Slide 22 recaps our capital position. Reported common equity tier one increased to 10.3% and has increased sequentially for five quarters.

Speaker Change: Slide 22, recaps our capital position.

Speaker Change: Ported common equity tier one increased to 10, 3% and has increased sequentially for five quarters, our adjusted CET, one ratio inclusive of a O C. I was 8.6%.

Stephen D. Steinour: We remained focused on executing our strategies, including growing consumer primary bank relationships by 3%. Additionally, we completed the realignment of business segments. We also delivered on efficiency initiatives, including Operation Accelerate.

Speaker Change: Our adjusted CET1 ratio, inclusive of AOCI, was 8.6%.

Speaker Change: This metric increased 58 basis points compared to the prior quarter.

This metric increased 58 basis points compared to the prior quarter driven by adjusted earnings net of dividends as well as the benefit from the credit risk transfer transaction, we announced in December which more than offset the impact from the FDIC special assessment.

Speaker Change: Thank you for joining us.

Speaker Change: Thank you for joining us. We also saw a significant benefit from AOCI recapture given the move in rates during the quarter. Our capital management strategy remains focused on driving capital ratios higher while maintaining our top priority to fund high-return loan growth. We intend to drive adjusted CET1, inclusive of AOCI, into our operating range of 9 to 10%. On slide 23, credit quality continues to perform very well, and normalization of metrics is consistent with our expectations. Net charge-offs were 31 basis points for the quarter. This was higher than Q3 by 7 basis points and resulted in full-year net charge-offs of 23 basis points.

Stephen D. Steinour: The Voluntary Retirement Program, Staffing Efficiency, Business Process Offshoring, and Branch and Other Real Estate Consolidation. We were nimble and opportunistic, adding key talent this past year with the addition of three new specialty commercial banking verticals. We also expanded our commercial and regional bank into the Carolinas, adding experienced teams in these attractive and high-growth markets. Additionally, we further strengthened our balance sheet and drove capital ratios higher over the course of the year. We are getting ahead of proposed industry requirements. And finally, credit was managed exceptionally well with full-year net charge-offs of 23 basis points. Moving to slide six.

Speaker Change: We also saw significant benefit from AOCI recapture given the move in rates during the quarter.

Speaker Change: We also saw significant benefit from a OCI recapture given the move in rates during the quarter.

Speaker Change: Our capital management strategy remains focused on driving capital ratios higher while maintaining our top priority to fund high return loan growth. We intend to drive adjusted CET1, inclusive of AOCI, into our operating range of 9 to 10%. On slide 23, credit quality continues to perform very well and with normalization of metrics consistent with our expectations.

Speaker Change: Our capital management strategy remains focused on driving capital ratios higher while maintaining our top priority to fund high return loan growth, we intend to drive adjusted CET, one inclusive of a OCI into our operating range of 9% to 10% on slide 23.

Speaker Change: Credit quality continues to perform very well and with normalization of metrics consistent with our expectations.

Speaker Change: Net charge-offs were 31 basis points for the quarter. This was higher than Q3 by 7 basis points and resulted in full-year net charge-offs of 23 basis points.

Speaker Change: Net charge offs were 31 basis points for the quarter. This was higher than Q3 by seven basis points and resulted in full year net charge offs of 23 basis points.

Speaker Change: This outcome was aligned with our outlook for full-year net charge-offs between 20 and 30 basis points, at the low end of our target through the cycle range for net charge-offs of 25 to 45 basis points. Gross charge-offs in the fourth quarter were relatively flat, with the overall change in net charge-offs largely a result of lower recovery.

Speaker Change: This outcome was aligned with our outlook for full year net charge-offs between 20 and 30 basis points at the low end of our target through the cycle range for net charge-offs of 25 to 45 basis points.

Speaker Change: This outcome was aligned with our outlook for full year net charge offs between 20, and 30 basis points at the low end of our target through the cycle range for net charge offs of 25 to 45 basis points.

Speaker Change: Gross charge-offs in the fourth quarter were relatively flat, with the overall change in net charge-offs largely a result of lower recovery.

Speaker Change: Gross charge offs in the fourth quarter were relatively flat with the overall change in net charge offs, largely a result of lower recoveries gear.

Speaker Change: Given ongoing normalization, non-performing assets increased from the previous quarter while remaining below the prior 2021 level. The criticized asset ratio increased quarter over quarter, with risk rating changes within commercial real estate being the largest component.

Speaker Change: Given ongoing normalization, non-performing assets increased from the previous quarter, while remaining below the prior 2021 level.

Speaker Change: Given ongoing normalization nonperforming assets increased from the previous quarter, while remaining below the prior 2021 level the criticized asset ratio increased quarter over quarter with risk rating changes within commercial real estate being the largest component.

Speaker Change: The criticized asset ratio increased quarter over quarter, with risk rating changes within commercial real estate being the largest component.

Stephen D. Steinour: While we deliver this accelerated growth, we will continue to maintain our aggregate moderate to low risk appetite. Zach, it's over to you to provide more detail on our financial performance. Thanks, Steve, and good morning, everyone.

Speaker Change: Allowance for credit losses was higher by one basis point to 1.97% of total loans.

Speaker Change: The allowance for credit losses was higher by one basis point to 1.97% of total loans, and our ACL coverage ratio continues to be among the top quartile in the peer group.

Speaker Change: Allowance for credit losses was higher by one basis point to 1.97% of total loans and our ACL coverage ratio continues to be among the top quartile in the peer group.

Speaker Change: and our ACL coverage ratio continues to be among the top quartile in the peer group.

Zachary J. Wasserman: Slide 7 provides highlights of our fourth-quarter results. We reported GAAP earnings per common share of 15 cents and adjusted EPS of 27 cents. The quarter included $226 million of notable items, primarily related to the FDIC special assessment, which impacted EPS by 12 cents per common share. Additionally, the termination of the pay-fixed swaption hedging program impacted pre-tax income by $74 million, or four cents per share. Return on Tangible Common Equity, or ROTCE, came in at 8.4% for the quarter. Adjusted for notable items, it was 15.1%. Average deposits continued their trend of growth into the fourth quarter, increasing by $1.5 billion, or 1%. Cumulative deposit beta totaled 41% through year-end. The loan balance has increased by $445 million as we continue to optimize the pace of loan growth to drive the highest return on capital. Credit quality remains strong. The trend is normalizing, consistent with our expectations, and net charge-offs totaled 31 basis points. The allowance for credit losses ended the quarter at 1.97%.

Speaker Change: Let's turn to our outlook for 2024.

Speaker Change: Let's turn to our outlook for 2024. As we mentioned, we expect to drive accelerated loan growth between 3% and 5% for the full year. Deposits are likewise expected to continue their solid trend of growth between 2% and 4%. As a result of the loan growth and margin outlook I shared earlier, net interest income for the full year is expected to range between down 2% to up 2%. The pace of loan growth, coupled with the rate scenario we see actually playing out, will drive the range of spread revenue. If the higher-for-longer rate scenario plays out, and loan growth tracks to the top end of our range, we expect interest income to grow by approximately 2%.

Speaker Change: Let's turn to our outlook for 'twenty 'twenty four as.

Speaker Change: As we mentioned, we expect to drive accelerated loan growth between 3% and 5% for the full year.

Speaker Change: As we mentioned, we expect to drive accelerated loan growth between three and 5% for the full year.

Speaker Change: Deposits are likewise expected to continue their solid trend of growth between 2% and 4%.

Speaker Change: Deposits are likewise expected to continue their solid trend of growth between two and 4%.

Speaker Change: As a result of the loan growth and margin outlook I shared earlier,

As a result of the loan growth and margin outlook I shared earlier net interest income for the full year is expected to range between down 2% to up 2%.

Speaker Change: Net interest income for the full year is expected to range between down 2% to up 2%.

Speaker Change: The pace of loan growth, coupled with the rate scenario we see actually play out, will drive the range of spread revenue. If the higher-for-longer rate scenario plays out, and loan growth tracks to the top end of our range, we expect an interest income to grow by approximately 2%. If the lower scenario comes to fruition, and loan growth tracks to the lower end of our growth range, we could see spread revenue declining 2%.

Speaker Change: The pace of loan growth coupled with the rate scenario, we see actually play out will drive the range of spread revenue if the higher for longer rate scenario plays out and loan growth tracks to the top end of our range. We expect interest income to grow by approximately 2% if the lower scenario comes to fruition and loan growth tracks to the lower end of our grew.

Speaker Change: If the lower scenario comes to fruition, and loan growth tracks to the lower end of our growth range, we could see spread revenue declining 2%. In both scenarios, I expect net interest income to trough in the first quarter before expanding throughout 2024 from that level. Non-interest income on a core underlying basis is expected to increase between 5% and 7%. The baseline for core excludes notable items, the mark-to-market impact from the PayFix Swaption Program, as well as CRT impact.

Speaker Change: Range, we could see spread revenue declining two percentage points in both scenarios I expect net interest income to trough in the first quarter before expanding throughout 'twenty 'twenty four from that level.

Speaker Change: In both scenarios, I expect net interest income to trough in the first quarter before expanding throughout 2024 from that level.

Speaker Change: Non-interest income on a core underlying basis is expected to increase between 5% and 7%.

Speaker Change: Non interest income on a core underlying basis is expected to increase between five and 7%.

Speaker Change: The baseline of core excludes notable items, the mark-to-market impact from the PayFix Swaption Program, as well as CRT impact.

Speaker Change: The baseline of core excludes notable items, the mark to market impact from the pay fixed swaps and program as well as CRT impacts.

Speaker Change: Thank you for joining us.

Speaker Change: Thank you for joining us. Core expenses are expected to increase by 4.5%. This level reflects the finalization of our budget and includes the additional loan growth we discussed earlier, which will have some incremental compensation expense tied to production. However, expenses could fluctuate depending on the level of revenue-driven compensation primarily associated with our fee-based revenues, including capital markets. The tax rate is expected to be approximately 19% for the full year.

Speaker Change: Fee revenue growth is expected to be driven primarily by capital markets payments and wealth management.

Zachary J. Wasserman: Turning to slide 8, as I noted, average loan balances increased quarter over quarter and were higher by 2% year over year. We expect the pace of future loan growth to accelerate over the course of 2024. Total commercial loans increased by $125 million for the quarter and included distribution finance, which increased by $225 million, benefiting from normal seasonality as manufacturer shipments increased due to inventory build of winter products, auto floor plan, which increased by $359 million, and CRE balances, which declined by $361 million, including the impact of payoffs and normal amortization. And all other commercial categories net decreased as we continued to drive optimization toward the highest return.

Speaker Change: Core expenses are expected to increase by 4.5%. This level reflects the finalization of our budget and includes the additional loan growth we discussed earlier, which will have some incremental compensation expense tied to production. Expenses could fluctuate depending on the level of revenue-driven compensation primarily associated with our fee-based revenues, including capital markets.

Speaker Change: Core expenses are expected to increase by four 5%. This level reflects the finalization of our budget and includes the additional loan growth. We discussed earlier, which will have some incremental compensation expense tied to production expenses could fluctuate depending on the level of revenue driven compensation primarily associated.

Speaker Change: With our fee based revenues, including capital markets.

Speaker Change: The tax rate is expected to be approximately 19% for the full year.

Speaker Change: We expect net charge-offs for the full year to be between $25 and $35 billion.

Speaker Change: We expect net charge offs for the full year to be between 25, and 35 basis points with that we'll conclude our prepared remarks and move to questions and answers Tim over to you.

Speaker Change: With that, we'll conclude our prepared remarks and move to questions and answers. Tim, over to you.

Timothy R. Sedabres: Thanks Zach. Operator, we will now take questions. We ask that as a courtesy to our peers, each person ask only one question and one related follow-up. And then if that person has additional questions, he or she can add themselves back into the queue. Thank you.

Timothy R. Sedabres: Thanks Zach. Operator, we will now take questions. We ask that, as a courtesy to our peers, each person ask only one question and one related follow-up. And then if that person has additional questions, he or she can add himself back into the queue. Thank you.

Tim: Zach operator, we will now take questions, we ask that as a courtesy of your peers. Each person ask only one question and one related follow up and then if that person has additional questions he or she can add themselves back into the queue. Thank you.

Zachary J. Wasserman: In consumer, growth was led by residential mortgage, which increased by $295 million, and RV Marine, which increased by $121 million, while auto loan balances declined for the quarter. Turning to slide 9, as noted, we continued to gather deposits consistently in the fourth quarter. Average deposits increased by $1.5 billion, or 1% from the prior quarter. Turning to slide 10.

Speaker Change: Thank you. If you'd like to ask a question today, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue.

Speaker Change: Thank you. If you'd like to ask a question today, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. From a distance using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions.

Speaker Change: Thank you for.

Speaker Change: To ask a question today. Please press star one on your telephone keypad.

Tolerant indicate your line is in the question queue.

Speaker Change: You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: You May press Star two if you like to remove your question from the queue.

Speaker Change: From distance using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Of this Q&A speaker equipment may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please, while we poll for questions.

One moment please poll for questions. Thank you.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Our first question today is coming from the line of Manan Gosalia with Morgan Stanley. This is you with your question.

Speaker Change: Our first question today is coming from the line of Manan <unk> with Morgan Stanley. Please proceed with your questions.

Zachary J. Wasserman: Growth was maintained each month throughout the fourth quarter, continuing the recent trend. Total cumulative deposit beta ended the year at 41%, in line with our expectations and reflecting the decelerating rate of change we would expect at this point in the rate cycle. As we've noted in the past, where beta ultimately tops out will be a function of the end game for the rate cycle in terms of the level and timing of the peak and the duration of any extended pause before a decrease. Given market expectations for rate cuts to start sometime in 2024, our current outlook for deposit beta remains unchanged, trending a few percentage points higher and then beginning to revert and fall if and when we see rate cuts from the When interest rate cuts commence, we expect to manage betas on the way down with the same discipline as we have during increasing rates on the way up. Turning to slide 11.

Manan Gosalia: Hi, good morning.

Manan: Hi, good morning.

Manan: What it is.

Manan Gosalia: I wanted to start off on the expense guide change. I know it's a small change from 4% to 4.5%, but it is higher than some of your peers are guiding to for 2024. So I was hoping you could elaborate more on what's going into that. And also, if there is a similar flex on the expense side as there is on the revenue, so for instance, if you get to your down 2% NII number with more rate cuts, does that drive a little bit of flex on the expense side as well?

Manan Gosalia: I wanted to start off on the expense guide change. I know it's a small change from 4% to 4.5%, but it is higher than some of your peers are guiding to for 2024. So I was hoping you could elaborate more on what's going into that. And also, if there is a similar flex on the expense side as there is on the revenue side, so for instance, if you get to your down 2% NII number with more rate cuts, does that drive a little bit of flex on the expense side as well? Great question, Manon. This is Zach.

Manan: I wanted to start off on the expense guide add Chan Gena I know, it's a small change from 4% to 4.5%, but it is higher than some of your peers are guiding to for 2024. She was hoping you could elaborate more on that.

Manan: What's going into that.

Manan: And also if there is a similar flex on the expense side is there is that the revenue. So for instance, if you get too.

You're down 2% NII number with that with with more rate gods.

Manan: Does that drive a little bit of flex in the expense side as well.

Manan Gosalia: I'll take that. The guidance that we had given back in October and in December was really primarily designed to be an early view for you so you could get an insight into some of the key decisions we were making and for us to really be able to discuss that in detail. That was the approximate 4% we discussed before. The finalization of our budget reflects the additional loan growth that we've now added to the plan and associated e-revenues as well. That's what represents the difference up to 4.5%. To give you a sense, it's about $5 million a quarter, so relatively small.

Manan Gosalia: Great question, Manon. This is Zach. I'll take that. The guidance that we had given back in October and in December was really primarily designed to be an early view for you so you can get an insight into some of the key decisions we were making and for us to really be able to discuss that in detail. That was the approximate 4% we discussed before. The finalization of our budget reflects the additional loan growth that we've now added to the plan and associated e-revenues as well. That's what represents the difference up to 4.5%. To give you a sense, it's about $5 million a quarter, so relatively small. I think your, and by the way, the underlying drivers of that are unchanged from what we have discussed before. We'll continue to drive significant efficiencies in the core based on expenses with a number of programs. We'll continue to invest in our strategic growth initiatives. We'll execute on the incremental build of capabilities and automation and data to get ahead of the coming regulations and we'll execute on the new, really attractive commercial growth opportunities we've discussed before. All of that's included in that number and no change to our expectation as well about reducing that growth rate as we go into 2025 back to more normalized levels. As it relates to your question in terms of the kind of marginal sensitivity, certainly there will be to some degree that. I think the expense is generally calibrated to sort of the middle of the ranges we've got in growth and revenues. And so, some potential upside of expenses if all of the revenues hit the high end and likewise some potential opportunity if the revenues went below.

Great question, Manav, Zach I'll take that.

Manan: The guidance that we've given back in October and in December was really primarily designed to be an early view for us.

Manan: At insight into some of the key decisions that we're making.

Zachary J. Wasserman: Non-interest-bearing mix shift continues to track closely to our forecast with deceleration of sequential changes. The non-interest-bearing percentage decreased by 80 basis points from the third quarter, and we continue to expect this mixed shift to moderate and stabilize during 2024. On to slide 12. For the quarter, net interest income decreased by $52 million, or 3.8%, to $1,327,000,000.

Manan: And of course, we will be able to adjust our starts to discuss that.

Manan: T O.

Manan: What we are selling discussed four.

Manan: The finalization of our budget reflects the additional loan growth.

Manan: The plan.

Manan: Let's see.

Revenues as well.

Manan: Well represent the difference up to 45% it's.

Manan: It's about $5 billion, so relatively small I think you are.

Manan Gosalia: I think your, and by the way, the underlying drivers of that are unchanged from what we have discussed before. We'll continue to drive significant efficiencies in the core based on expenses across a number of programs. We'll continue to invest in our strategic growth initiatives. We'll execute on the incremental build of capabilities, automation, and data to get ahead of the coming regulations, and we'll execute on the new, really attractive commercial growth opportunities we've discussed before. All of that's included in that number, and there is no change to our expectation as well about reducing that growth rate as we go into 2025 back to more normalized levels.

Manan: Underlying drivers of that are.

Manan: Unchanged from what we have discussed before we'll continue to drive significant efficiencies in core.

Zachary J. Wasserman: That the interest margin declines sequentially to 3.07%, in line with our forecast. We have benefited from our asset sensitivity and the expansion of margins, with net interest revenues growing at an 8% CAGR over the past two years. Reconciling the change in NIMH from Q3, we saw a decrease of 13 basis points for NIMH from Q3 to Q4.

Manan: So the number of programs.

Manan: Programs will continue to invest.

Manan: TG growth initiatives, we will execute on them.

Manan: Incremental build capabilities and automation of data.

New regulations, and we will execute on the new.

Manan: It was really attracted commercial largely as we've discussed before all of that included in that number.

Change to our expectation as well reducing that group.

Zachary J. Wasserman: This was primarily due to a lower spread net of free funds, which accounted for nine basis points, along with a two basis point negative impact from lower FHLB stock dividends and a two basis point reduction from hedging. Turning to slide 13, let me share a few added thoughts around the fixed rate loan repricing opportunity that will benefit us over the moderate term. The constructed or balance sheet is approximately half fully variable rate. 10% in indirect auto, which is a shorter, approximately two-year average life, and 10% in arms with a four-year average life.

Manan: 2345, excuse me back to more normalized levels.

Manan Gosalia: As it relates to your question in terms of the kind of marginal sensitivity, certainly there will be to some degree that. But I think the expense is generally calibrated to sort of the middle of the ranges we've got in growth and revenues. And so, there is some potential upside to expenses if all of the revenues hit the high end, and likewise, some potential opportunity if the revenues go below.

Manan: It relates to your question in terms of marginal sensitivity.

Manan: Suddenly that will lead to some degree of that.

The expense guidance, it's really calibrated.

Manan: Of the ranges, we've got revenues and so.

Manan: So some potential upside.

Manan: All of the revenues at the high end likewise, some potential opportunities.

Manan: Yes.

Speaker Change: Great, thank you. And my next question was on the deposit franchise. You have a pretty strong core consumer deposit franchise and some of your peers have highlighted that there's still some lagged upward repricing in deposits there. So can you talk about how you expect those deposits to behave over the next few quarters and then as the Fed begins to cut rates?

Speaker Change: Great, thank you. And my next question was about the deposit franchise. You have a pretty strong core consumer deposit franchise, and some of your peers have highlighted that there's still some lagged upward repricing in deposits there. So can you talk about how you expect those deposits to behave over the next few quarters and then as the Fed begins to cut rates? Yep, this is Zach. I'll take that one again. What we've been seeing in the marketplace broadly with respect to deposit costs and deposit data, both across both consumer and commercial, is what you would expect, a deceleration of the sequential changes, and, very much for us, trending highly aligned to our expectations.

Speaker Change: Great. Thank you.

My next question was on <unk>.

Speaker Change: The deposit franchise that you have a pretty strong car consumer deposit franchise and some of you guys have highlighted that theres still some lagged our blood repricing of deposits. There. So can you talk about how you expect that to us.

Zachary J. Wasserman: The remainder of approximately 30% is longer average life fixed. We have seen notable increases in fixed asset portfolio yields thus far in the rate cycle. Even as the forward curve forecasts lower short-term rates, many of our fixed-rate loan portfolios retain substantial upside repricing opportunity for some time to come. We forecast approximately $13 to $15 billion of fixed-rate loan repricing opportunity in 2024, with an estimated yield benefit of approximately 350 basis points. Slide 14 provides the drivers of our spread revenue growth. As a reminder, we continue to analyze and develop action plans for a wide range of potential economic and interest rate scenarios. The basis for our planning and guidance continues to be a central set of those scenarios that is bound on the lower end by a scenario that includes five rate cuts in 2024. The higher scenario assumes rates stay higher for longer and tracks closely with the Fed's dot plot from year end. This scenario assumes three cuts in 2024.

Speaker Change: Was it to behave over the next few quarters and then as the fed begins to cut rates.

Speaker Change: Yep, this is Zach, I'll take that one again. You know, what we've been seeing in the marketplace broadly with respect to deposit costs and deposit data, both across both consumer and commercial, is what you expect, a deceleration of the sequential changes, and very much for us, trending highly aligned to our expectations. As well, I will tell you that we are beginning to see in the marketplace a fairly constructive initial sign of firms preparing for what will likely be soon a down beta environment with a shortening, for example, of time deposit terms, with a change of promotional terms around money market, and select testing of different price points for unique segments and unique geographies, all of which is what you'd expect to presage will ultimately be a series of down beta moves. With respect to your specific question on consumer. So, will that trend? I think the answer is yes. You know, what we have been saying a lot is that deposit costs and beta will continue to trend at a decelerating rate through the pause period until such time as there is a rate reduction. And so, that's our expectation as well. I will say that the go-to-market pricing is generally here pretty consistent, if not, again, testing somewhat lower price points, but there's, of course, sort of an embedded momentum. There's somewhat upward bias in terms of pricing for at least another quarter here. And then we'll see. Do we get a rate cut in March? Somewhat aggressive in our view, but it's possible, in which case down beta begins very quickly. Does the rate environment hold out for the pause until September, in which case we'll see kind of a longer period of drift.

This is Jack I'll take that one.

Jack: What we see in the marketplace broadly with respect to deposit cost and deposit beta both across both consumer and commercial.

Jack: What do you expect a deceleration on the sequential changes.

Speaker Change: Thanks, very much for us trending highly lives to our expectations.

Speaker Change: As well, I will tell you that we are beginning to see in the marketplace a fairly constructive initial sign of firms preparing for what will likely be soon a down beta environment with a shortening, for example, of time deposit terms, with a change of promotional terms around money market, and select testing of different price points for unique segments and unique geographies, all of which is what you'd expect to presage will ultimately be a series of down beta So, will that trend? I think the answer is yes.

Speaker Change: As well I will tell you that we are beginning to see in the marketplace fairly constructive initial sign up first.

Speaker Change: It will likely soon.

Speaker Change: Environment with a shortening for example time deposit terms the change of promotional money market and select testing.

Speaker Change: Price points.

Speaker Change: These segments and geographies all of which is.

When should we start to decrease age.

Speaker Change: B series.

Seriously demonstrator moves with respect to your specific question on <unk>.

Speaker Change: You know, what we have been saying a lot is that deposit costs and beta will continue to trend at a decelerating rate through the pause period until such time as there is a rate reduction. And so, that's what our expectation as well. I will say that the go-to-market pricing is generally pretty consistent here, if not again, testing somewhat lower price points, but there's, of course, sort of an embedded momentum. There's a somewhat upward bias in terms of pricing for at least another quarter. And then we'll see. Do we get a rate cut in March? Somewhat aggressive in our view, but it's possible, in which case down beta begins very quickly. Does the rate environment hold out for the pause until September, in which case we'll see kind of a longer period of drift.

Speaker Change: Sure so will that trend.

Speaker Change: Yes.

What we have been saying all along is that.

Zachary J. Wasserman: We continue to be focused on managing net interest margin in a tight chord. Should the lower rate scenario play out and we see rate cuts as early as March, that will likely result in a margin over the course of the year within a range near the level we saw in the fourth quarter. This would equate to an net interest margin between 3% and 3.1% for each quarter of 2024. However, if the higher-for-longer scenario comes to pass, we expect the margin to expand, and at a level that is up to 10 basis points above that. As we saw in December, the outlook for longer-term interest rates also moved lower significantly.

Speaker Change: The costs and data will continue to trend at a decelerating rate through the pause period until such time as there is a rate reduction.

Speaker Change: That's our expectation as well.

Speaker Change: The go to market pricing it.

Speaker Change: Is generally pretty consistent.

Speaker Change: Adjusting somewhat.

Speaker Change: But there is of course.

Speaker Change: Momentum somewhat upward bias in terms of pricing for at least another quarter here and then we'll see.

Speaker Change: In March somewhat aggressive in our view as possible, which kicks out basically give them pretty quickly.

Speaker Change: Rate environment pulled out the policy until September <unk>.

Zachary J. Wasserman: There are a number of benefits from this lower market rate outlook. First, it resulted in higher capital levels, given AOCI accretion, which supports our accelerated loan growth outlook now. Second, it provides for easing deposit competition over time. Third, it provides credit support for borrowers with the potential for locking in lower long-term rates.

Speaker Change: Longer periods of duress.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Thanks for your question.

Speaker Change: Our next questions come from the line of Erika Najarian with UBS.

Speaker Change: Our next questions come from the line of Erika Najarian with UBS. Please proceed with your question.

Erika Najarian: We'll see you with your questions.

Erika Najarian: We'll see you with your questions. Hi, good morning. And by the way, whoever wrote that script, the guidance could not be any clearer, so that was great. Just that being said, a few follow-up questions. You know, the loan growth guidance from your peers would imply, you know, that the macro outlook, which seems pretty consensus, you know, is indicative of, you know, softer opportunities. And perhaps this is a good chance, you know, clearly you've been telling us for the past few years that you've set yourself up differently, and you've set yourself up differently to outperform, and maybe go back through those opportunities where they think that, you know, the average loan growth number is certainly notable versus peers, and perhaps remind us of why Huntington is a particularly unique set of growth opportunities for this year.

Erika Najarian: Hi, good morning. And by the way, whoever wrote that script, the guidance could not be any clearer, so that was great. Just that being said, a few follow-up questions. You know, the loan growth guidance from your peers would imply, you know, that the macro outlook, which seems pretty consensus, you know, is indicative of, you know, softer opportunities. And perhaps this is a good chance, you know, clearly you've been telling us for the past few years that you've set yourself up differently, and you've set yourself up differently to outperform, and maybe go back through those opportunities that they think that, you know, the average loan growth number, you know, is certainly notable versus peers, and perhaps remind us of why Huntington is a particularly unique set of growth opportunities for this year.

Erika Najarian: Hi, good morning, and whoever wrote that scrap.

Guidance could not be any clearer.

Erika Najarian: Right.

Erika Najarian: That being said a few follow up question.

Zachary J. Wasserman: However, the rate outlook is incrementally more challenging for full-year spread revenue than the levels we had seen underlying our guidance in December. Net of these items, including the forecasted pace of loan growth, we now expect net interest income on a dollar basis. To trough in the first quarter before expanding sequentially from that level over the course of the year. Turning to slide 15, our contingent and available liquidity continues to be robust at $93 billion and has grown quarter over quarter. At quarter end, we continue to benefit from a diverse and highly granular deposit base with 70% insured deposits. Our pool of available liquidity represented 206% of total uninsured deposits, which appears to lead coverage.

Erika Najarian: The loan growth guide in terms of Europe here would imply.

Erika Najarian: Macro outlook.

Erika Najarian: No.

Indicative of softer opportunity and perhaps this is a good chance you know clearly you've been telling us for the past few years that you've set yourself up differently.

Erika Najarian: And you've got yourself differently to outperform.

Erika Najarian: And maybe we'll go back.

Erika Najarian: I think that yeah. The average loan growth number yes, it's certainly notable here and perhaps remind us of why.

Erika Najarian: Nick.

Erika Najarian: Opportunity for this year.

Erika Najarian: Eric This is Steve I'll start with that because you've asked the broader history and and then secondly.

Zachary J. Wasserman: Turning to slide 16, our level of cash and securities at year-end increased as we've begun to reinvest portfolio cash flows during the fourth quarter. This investment strategy is consistent with our approach to continue to manage the unhedged duration of the portfolio lower over time. We have reduced the overall hedge duration of the portfolio from 4.1 years to 3.7 years over the past 18 months.

Stephen D. Steinour: So first.

Stephen D. Steinour: We just think.

Stephen D. Steinour: The discipline on our aggregate moderate to low risk appetite, which has been in place now for 14 years.

Stephen D. Steinour: And it has helped us as we've decided.

Stephen D. Steinour: To pursue and whatnot.

Stephen D. Steinour: Too soon to see.

Stephen D. Steinour: With that in mind, we've been very purposeful strategic about growing these businesses and you saw at the Investor day of mid teens.

Zachary J. Wasserman: We've updated our forecast for the recapture of AOCI. As of year end, we've recaptured 26% of total AOCI from the peak level at September 30th. Using market rates at year end, we would recapture an estimated incremental 44% of AOCI over the next three years. Turning to slide 18.

Stephen D. Steinour: Our rate of growth look like especially banking. So we have a very strong middle market.

Stephen D. Steinour: Banking set of capabilities, we have a tremendous amount of small business.

Capabilities and capacity we have.

Stephen D. Steinour: The density in Ohio on small business and we're achieving that now in other states or sort of regional banking franchise, performing very very well.

Erika Najarian: And so a bit of short-term challenge with respect to operating leverage will yield a very significantly better earnings growth trajectory through the course of 2024 and 2025. The earnings outlook looks exceptionally strong as well. So just to add to Steve's point, I think the whole system is really working, and that'll yield powerful results.

Stephen D. Steinour: Is that a specialties that have been.

Zachary J. Wasserman: We continued to be dynamic in positioning our hedging program. As the rate outlook changed over the course of the fourth quarter, we focused our objective incrementally on the protection of NIM in downrate scenarios and actively reduced instruments that were intended to protect capital in uprate scenarios. As we announced in late December, we terminated the pay fixed swaptions program as our assessment of the probability of substantial upgrade moves decreased.

Stephen D. Steinour: Put in place just three new ones last year, which by the way, they're all off to a terrific sites.

Stephen D. Steinour: And then the expansion we've been in like Dallas, and Charlotte for a decade or more what.

Stephen D. Steinour: What do we see opportunities we may pursue that.

Stephen D. Steinour: An example of that is in the Carolinas.

Stephen D. Steinour: We believe we've got it.

Stephen D. Steinour: Group of new colleagues coming to us with teens.

Stephen D. Steinour: Just outstanding people that we've been following for years and it all came together we were investing others were not.

Zachary J. Wasserman: Over the course of Q2 through Q4, this program worked as intended, providing significant protection against possible tail risk uprate moves with a modest overall cost for that insurer. Additionally, during the quarter, we added to our downrate NIM protection strategy. Adding $2.1 billion of forward starting receive fixed swaps and adding $1 billion of floor spread. We exited $2 billion of callers, which were near expiration. Our objective with respect to our downrate hedging activities remains unchanged to support the management of the net interest margin in as tight a range as possible. Moving on to slide 90.

Stephen D. Steinour: And there was a moment too.

Got.

Stephen D. Steinour: In addition to that we still have opportunities in these key markets.

Stephen D. Steinour: Credibly well in Michigan.

But what I would say we're early stage still in.

Stephen D. Steinour: In Chicago, the twin cities, and Denver, and we like those markets each of those markets. So we believe with the investments we've made in specialty banking core regional bank performed well with opportunity we've got lots of.

Stephen D. Steinour: Lots of growth.

Stephen D. Steinour: Potential in the next few years.

Stephen D. Steinour: With the.

Stephen D. Steinour: I didn't talk about the asset finance business or our distribution finance business.

Stephen D. Steinour: As a horse a phenomenal year last year, our auto business is one of our best.

Stephen D. Steinour: Businesses, we've got one of the really terrific teams in that area in the floor plan.

Zachary J. Wasserman: Our fee growth strategies remain centered on three key areas: capital markets, payments, and wealth management. Note this quarter in our earnings materials, we've updated the presentation of our non-interest income categories in order to more clearly highlight our strategic areas of focus and more closely align to the way we manage the business. Slide 35 in the appendix provides further detail on the components of each line item.

Stephen D. Steinour: Okay, very well in terms of its growth as well so lots of growth options.

Stephen D. Steinour: The equipment finance more broadly a lot of <unk>.

Stephen D. Steinour: Both options of that and you're seeing that through the cycle.

And so we believe we're poised to outperform.

Zachary J. Wasserman: These three key focus areas for fee growth collectively represent 63% of total non-interest income. We're seeing positive underlying growth in each of these areas. In Capital Markets, we're pleased that revenues expanded sequentially. Thank you.

Stephen D. Steinour: And as budgeted and expect our colleagues to do so.

Speaker Change: Yes. This is two.

Speaker Change: Two things first of all thanks for the.

Speaker Change: The compliment in terms of the guidance all the credits.

Speaker Change: Two questions.

Speaker Change: But just because the one thing I would add on top of that as.

Zachary J. Wasserman: Both advisory and core bank capital market products grew in the quarter. Our outlook is constructive for 2024, and we expect capital markets to remain a key driver of fee revenue growth over the medium term. Payments and cash management revenue includes debit and credit card revenues along with treasury management and merchant processing.

Erika Najarian: We were pretty purposeful about staying on a growth footing across the board and, importantly, in terms of the financial resources and investments that we were putting against our core growth opportunities. And, you know, recognize that the net outcome of that, including some of the other things that we want to do in terms of data and automation capabilities, would result in an overall expense growth that was higher than we would want to have relative to revenue growth, higher than we would typically target, and it certainly was something we discussed at length, as you know. But we took that view purposely and recognized it was contrarian because, in our view, the long-term earnings potential of staying in that growth posture is so much more advantageous than were we to have really significantly ratcheted back investments and expenses. And so a bit of short-term challenge with respect to operating leverage will yield very significantly better earnings growth trajectory through the course of 2024 and 2025. Earnings outlook looks exceptionally strong as well. So just to tack on to Steve's point, I think the whole system is really working and that'll yield powerful results.

Speaker Change: We were pretty purposeful.

Speaker Change: On a growth footing.

Speaker Change: Across the board and importantly in terms of financial resources and investment that we're putting against our core growth opportunities.

Speaker Change: Recognize that the net outcome of that including some of the other things as well.

Speaker Change: In terms of.

Speaker Change: Data and automation capabilities would result in an overall expense growth was higher than we would want you have relative to revenue growth higher than that.

Zachary J. Wasserman: Our payments opportunity is substantial, reflecting 31% of total fee revenues today, with the potential for significant growth over time. Wealth and Asset Management revenue has benefited from the realignment earlier this year, which brought together our private bank and retail advisory businesses under one umbrella. Our advisory penetration rate of the customer base continues to increase as wealth advisory households have grown 11% year over year and assets under management are up 16% from a year ago. Moving on to slide 20. On an overall level, GAAP non-interest income decreased 104 million dollars to $405 million for the fourth quarter.

Speaker Change: We would typically target.

Speaker Change: It's something we discuss flavors.

Speaker Change: But while we choked up from you purposely recognizing was contrarian.

Speaker Change: In our view that the long term earnings potential of stadiums that growth posture is so much more advantageous than worry too.

Speaker Change: Significantly ratchet it back.

Speaker Change: Investments and expenses and so a bit of short term challenges with the operating leverage will yield very significantly better earnings growth trajectory.

Speaker Change: Course of 2024.

Speaker Change: 25 of earnings.

Speaker Change: So just to tack on to Steve's point.

Zachary J. Wasserman: Excluding the mark-to-market on the pay-fix swaptions and the CRT premium, fees increased by $5 million quarter-over-quarter. Moving on to slide 21, Non-expensive. Gap's non-interest expense increased by $258 million, and underlying core expenses increased by $47 million.

Speaker Change: System is.

King.

Speaker Change: And now that you have.

Speaker Change: Sure.

Speaker Change: For sure. And you had the capital. So it all makes sense. And just a follow-up question. Again, so many moving pieces in terms of the rate outlook. But Zach, maybe update us on your rate sensitivity as of 12-31 after some of the moves that you made.

Speaker Change: For sure. And you had the capital. So it all makes sense. And just a follow-up question. Again, there are so many moving pieces in terms of the rate outlook. But Zach, maybe you could update us on your rate sensitivity as of 12-31 after some of the moves that you made in terms of your balance sheet management, and also, you know, if you could give us a little bit more detail about what you mean in terms of you know managing the betas on the way down with a similar discipline, and I wonder if you could give us, you know, maybe your expectations on deposit beta for the first hundred basis points of

Speaker Change: For sure and you had the capital so.

Speaker Change: It all makes sense.

Speaker Change: Follow up question.

Speaker Change: Again, so many moving pieces in terms of.

Speaker Change: The rate outlook.

Speaker Change: Maybe update us on your rate sensitivity.

Zachary J. Wasserman: As I mentioned, we incurred $226 million of notable item expenses related primarily to the FDIC Deposit Insurance Fund Special Assessment during the quarter. It also included the last portion of costs related to our staffing efficiency program and corporate real estate consolidation. Excluding these items, core expenses included higher personnel and professional services driven by seasonally higher benefits expense, incentives, as well as consulting expense.

As of 12 31.

Speaker Change: Thank goodness.

Speaker Change: in terms of your balance sheet management and also you know if you could give us a little bit more detail about what you mean in terms of you know managing the betas on the way down with a similar discipline and I wonder if you could give us you know maybe your expectations on deposit beta for the first hundred basis points of rate.

Speaker Change: And in terms of balance sheet management and also if you could.

Speaker Change: Give us a little bit more detail about what you mean in terms of managing debated on the way down and it's kind of like discipline and I Wonder if you could give us.

Speaker Change: Maybe your expectations on deposit beta for the first hundred basis points of rate.

Speaker Change: Sure. Great questions, both. There's a lot in there to unpack, so I think we can address those both. As it relates to asset sensitivity for December, I expect it to be roughly consistent with the asset sensitivity we saw that was reported in October, and you'll see that come out in the queue, sorry, in the K. You know, as we've discussed over time, you know, the business is naturally asset sensitive, and so clearly on the way up with the industry cycle, we've benefited very significantly in terms of margin expansion and revenue growth. I will note as well, something just important to assess as you're thinking about asset sensitivity is in our security portfolio, as you know, we've hedged a large portion of our variable-for-sale securities, which has benefited significantly in terms of yields rising higher. You know, in terms of assets that are protecting capital, in the asset sensitivity metric, in the Dow 100 ramp scenario, for example, it represents about a percentage point of additional sensitivity from those swaps. Those swaps will roll off over the course of the next 12 to 18 months, and most of that impact and sensitivity will begin to ramp off starting the second half of 24 and continuing on for about a 12-month period thereafter. The other thing I'll just say as an important point is... Those sensitivity metrics are pretty academic and not standardized across the industry, with lots of assumptions, the beta being the most significant, but also whether those analyses are ramps on top of the forward curve, or whether they're just from a start point. Ours is a ramp on top of the forward curve, so certainly advise that it's important to assess those assumptions pretty carefully in comparing those metrics across firms.

Speaker Change: Sure Great question as well because there's a lot to do there.

Zachary J. Wasserman: The level of expenses we saw in the fourth quarter is largely consistent with the dollar amount we expect quarterly over the course of 2024. This is inclusive of the investments we've discussed previously, as well as sustained efficiencies we are driving across the company. Slide 22 recaps our capital position. Reported common equity tier one increased to 10.3% and has increased sequentially for five quarters. Our adjusted CET1 ratio, inclusive of AOCI, was 8.6%.

Speaker Change: Adjustables.

Speaker Change: Otherwise asset sensitivity for us for December I expect it to be roughly consistent with the asset sensitivity you saw.

Speaker Change: Got it.

October and to see that come out into the queue, we're starting to Kay.

Speaker Change: As we discussed over time, the business is naturally asset sensitive and so.

Speaker Change: On the way up with industry Titan benefits very significantly in terms of margin expansion and revenue growth.

Speaker Change: I will note as well just as important to assess as you're thinking about asset sensitivity in our securities portfolio as you know we hedge.

Zachary J. Wasserman: This metric increased by 58 basis points compared to the prior quarter. Thank you for joining us. We also saw a significant benefit from AOCI recapture given the move in rates during the quarter. Our capital management strategy remains focused on driving capital ratios higher while maintaining our top priority to fund high-return loan growth. We intend to drive adjusted CET1, inclusive of AOCI, into our operating range of 9 to 10%. On slide 23, credit quality continues to perform very well, with normalization of metrics consistent with our expectations. Net charge-offs were 31 basis points for the quarter.

Speaker Change: Hedged a large portion of our available for sale Securities, which has benefited significantly in terms of yields rising higher projecting capital in the asset sensitivity metric in the calendar.

Speaker Change: You know, in terms of assets that are protecting capital, in the asset sensitivity metric, in the Dow 100 ramp scenario, for example, it represents about a percentage point of additional sensitivity from those swaps. Those swaps will roll off over the course of the next 12 to 18 months, and most of that impact and sensitivity will begin to ramp off starting the second half of 24 and continuing on for about a 12-month period thereafter. The other thing I'll just say as an important point is... Those sensitivity metrics are pretty academic and not standardized across the industry, with lots of assumptions, the beta being the most significant, but also whether those analyses are ramps on top of the forward curve, or whether they're just from a start point. Ours is a ramp on top of the forward curve, so I certainly advise that it's important to assess those assumptions pretty carefully in comparing those metrics across firms.

Speaker Change: Therefore represents about a percentage point of additional tests from those swaps those swaps will roll off over the course of the next 12 to 18 months and most of that impact.

Speaker Change: Cindy will begin to ramp off starting in the second half of 'twenty, four and continuing onshore without holding periods thereafter.

Speaker Change: The other thing I would just stay with us.

Speaker Change: Important point is those sensitivity metrics are pretty academics and now standardized across the industry with lots of assumptions the beta even more significant but also whether those analyses are ramps on top of the forward curve or whether theyre just will start hours as the ramp on top of the forward curve. So suddenly.

Zachary J. Wasserman: This was higher than Q3 by 7 basis points and resulted in full-year net charge-offs of 23 basis points. This outcome was aligned with our outlook for full-year net charge-offs between 20 and 30 basis points, at the low end of our target through the cycle range for net charge-offs of 25 to 45 basis points. Gross charge-offs in the fourth quarter were relatively flat, with the overall change in net charge-offs largely a result of lower recovery.

Speaker Change: It's important to assess those assumptions pretty carefully.

Speaker Change: This metrics across firms.

Speaker Change: Back to you so in terms of our balance sheet management posture incrementally for here I see the opportunity to add downside rate reduction hedges.

Our hedging strategy incrementally shifting from a focus on capital protection focused on downside protection as we discussed in the prepared remarks some of that in Q4 I suspect will continue to be incrementally added into those salary.

Zachary J. Wasserman: Given ongoing normalization, non-performing assets increased from the previous quarter while remaining below the prior 2021 level. The criticized asset ratio increased quarter over quarter, with risk rating changes within commercial real estate being the largest component. Allowance for credit losses was higher by one basis point to 1.97% of total loans, and our ACL coverage ratio continues to be among the top quartile in the peer group. Now, let's turn to our outlook for 2024. As we mentioned, we expect to drive accelerated loan growth between 3% and 5% for the full year. Deposits are likewise expected to continue their solid trend of growth between 2% and 4%.

Speaker Change: Section strategies over time, it should gradually reduce downside sensitivity.

Speaker Change: In terms of deposit beta and what we should be expecting for the first.

Speaker Change: X basis points.

Speaker Change: To give you a sense of in the scenario that I am looking at where rates in fact begin to fall in March.

Speaker Change: Five cuts invest a little more than your scenario, we would expect to see about a 20% roughly down beta over a three quarter period by the end of 2024 would of course be less than that.

Extended pause.

Speaker Change: The late summer time period, but just to give you a sense of.

Speaker Change: The sensitivity to your question.

Speaker Change: So clear. Thanks so much.

Zachary J. Wasserman: As a result of the loan growth and margin outlook I shared earlier, net interest income for the full year is expected to range between down 2% to up 2%. The pace of loan growth, coupled with the rate scenario we see actually play out, will drive the range of spread revenue. If the higher-for-longer rate scenario plays out, and loan growth tracks to the top end of our range, we expect interest income to grow by approximately 2%.

Speaker Change: No clear thank you so much.

Speaker Change: Thanks for having me.

Speaker Change: Thanks, Eric.

Speaker Change: Our next question is from the line of John Pancari with Evercore ISI.

Speaker Change: Our next question's from the line of John <unk> with Evercore ISI.

Sure.

Speaker Change: Sure.

John Pancari: Good morning.

John: Good morning.

John Pancari: On the capital front, I know you're

John: Alright.

John: On the.

John: Capital front.

John: Q1 increased nicely about 15 basis points to 10 in the quarter.

John Pancari: 51 increased nicely, about 15 basis points to turn the quarter in the fourth quarter. Just as you look at your trajectory here and your outlook for earnings and capital, organic capital generation, how are you thinking about potentially ramping up buybacks? and capital return overall. Great question, John. Thanks. This is Zach. I'll take that one. We're very pleased with the outcomes around the overall action plan we had with respect to managing capital and capital priorities throughout the course of 2023. As we've talked about, actively modulating the pace of loan growth to balance additional loan growth and revenue with also accreting capital on the balance sheet and clearly in the fourth quarter benefiting significantly from a recapture of AOCI, which allows us now to, once again, accelerate the pace of loan growth, as we discussed earlier.

John: Fourth quarter.

John: Just as you look at our trajectory here on your outlook for earnings and capital organic capital generation, how are you thinking about.

Zachary J. Wasserman: If the lower scenario comes to fruition, and loan growth tracks to the lower end of our growth range, we could see spread revenue declining 2%. In both scenarios, I expect net interest income to trough in the first quarter before expanding throughout 2024 from that level. Non-interest income on a core underlying basis is expected to increase between 5% and 7%. The baseline for core excludes notable items, the mark-to-market impact from the PayFix Swaption Program, as well as CRT impact. Thank you for joining us. Core expenses are expected to increase by 4.5%.

Potentially ramping up buybacks.

John Pancari: and capital return overall.

John: Capital return overall, thank you.

John Pancari: Great question, John. Thanks. This is Zach. I'll take that one. We're very pleased with the outcomes around the overall action plan we've had with respect to managing capital and capital priorities throughout the course of 2023. As we've talked about, actively modulating the pace of loan growth to balance additional loan growth and revenue with also accreting capital on the balance sheet and clearly in the fourth quarter benefiting significantly from a recapture of AOCI, which allows us now to, even yet again, accelerate the pace of loan growth, as we discussed earlier. And for the foreseeable future, I see us continuing on with that posture, driving, you know, the most important capital priority we have is to fund higher-term loan growth. And there is a significant opportunity for us to do that, which is the most value-creating decision that's in front of us.

Speaker Change: Great question, John Thanks, Zack I'll take that one.

Speaker Change: We're very pleased with the outcomes around the overall auction battery powered with respect to capital our capital priorities throughout the course of 2023 as we've talked about actively modulating the pace of loan growth.

Speaker Change: Balanced additional loan growth in revenue with also creating capital the balance sheet early in the fourth quarter benefiting significantly from a recapture of HCI, which allows us now to.

Speaker Change: Again, accelerating the pace slowed down.

John Pancari: And for the foreseeable future, I see us continuing on with that posture, driving, you know, the most important capital priority we have is to fund higher-term loan growth. And there is a significant opportunity for us to do that, which is the most value-creating decision that's in front of us.

Speaker Change: As we discussed earlier.

Speaker Change: And for the foreseeable future Ics continuing on with that posture.

Speaker Change: Driving most important capital priority is to fund high return of loan growth.

Zachary J. Wasserman: This level reflects the finalization of our budget and includes the additional loan growth we discussed earlier, which will have some incremental compensation expense tied to production. Expenses could fluctuate depending on the level of revenue-driven compensation primarily associated with our fee-based revenues, including capital markets. The tax rate is expected to be approximately 19% for the full year.

Speaker Change: Yes.

Speaker Change: Significant opportunities for us to do that.

Speaker Change: The most value creating decision is in front of us.

Speaker Change: and, importantly, at 8.6%, our adjusted CET1 has been rising a lot and we want to drive that into the 9-10% operating rate that we've discussed over time. So I think for the foreseeable future, we'll continue on with that plan. Once we get into the 9-10% range with adjusted CET1, we'll reassess our posture with respect to share repurchases. Over time, share repurchases are a really important part of the value creation model for the company and I absolutely expect us to get back to them and we're going to drive through those outcomes as soon as we possibly can. And John, as Zach shared with you in the third quarter call, we are advancing it if the pending capital requirements are in place. So we're building capital now that will meet those requirements should they be adopted.

Speaker Change: and importantly, at 8.6%, our adjusted CET1 has been rising a lot, and we want to drive that into the 9-10% operating rate that we've discussed over time. So I think for the foreseeable future, we'll continue on with that plan. Once we get into the 9-10% range with adjusted CET1, we'll reassess our posture with respect to share repurchases. Over time, share repurchases are a really important part of the value creation model for the company, and I absolutely expect us to get back to them, and we're going to drive through those outcomes as soon as we possibly can.

Speaker Change: Importantly at eight 6% our adjusted CET one is.

Speaker Change: It has been rising a lot and we wanted to drive that into the 9% to 10% operating rate that we've discussed over time, so I think for the foreseeable future.

Speaker Change: With that that plan once we get into the 96% range with adjusted <unk>, We'll we'll reassess our posture with respect to share repurchases over time.

Zachary J. Wasserman: We expect net charge-offs for the full year to be between $25 and $35 billion. With that, we'll conclude our prepared remarks and move to questions and answers. Tim, over to you. Thanks, Zach.

Speaker Change: The repurchases are a really important part of the value creation model for the company and I actually expect us to get back to that one.

Timothy R. Sedabres: Operator, we will now take questions. We ask that, as a courtesy to our peers, each person ask only one question and one related follow-up. And then if that person has additional questions, he or she can add themselves back into the queue.

Speaker Change: Yes.

Speaker Change: To those outcomes as soon as we possibly can and that is shared with you in the third quarter.

Speaker Change: And John, as Zach shared with you in the third quarter call, we are advancing it if the pending capital requirements are in place. So we're building capital now that will meet those requirements should they be adopted.

Speaker Change: We are.

Speaker Change: Advancing it.

Yes.

Speaker Change: Ending.

Speaker Change: Capital requirements are.

Speaker Change: So we're building capital now.

Speaker Change: Meet those requirements should they be adopted.

Operator: If you'd like to ask a question today, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. If you're using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Great Alright, Thank you and then also Steve.

Speaker Change: Great. All right. Thank you. And then also for you, Steve, I guess related to that, maybe if you could just talk about, you know, the whole debate around the need for scale as you look longer term at the evolution that's going on right now within the regional bank space.

Speaker Change: Great. All right. And then also for you, Steve, related to that, maybe if you could just talk about the whole debate around the need for scale as you look longer term at the evolution that's going on right now within the regional bank space.

Stephen D. Steinour: Hey, guys.

Stephen D. Steinour: Weighted to that.

Stephen D. Steinour: Maybe if you could just talk about.

Stephen D. Steinour: The whole debate around the need for scale as you look.

Longer term that the evolution, that's going on right now within the regional banks.

Stephen D. Steinour: Last year's failures and so the regulatory requirements and the need for scale to compete. How do you view the potential for whole bank M&A as a role in Huntington's outlook and what's the earliest do you think from an industry perspective, not necessarily for Huntington, that you think we can actually see a pickup in whole bank M&A given the backdrop and regulation?

Stephen D. Steinour: Last year's failures and so the regulatory requirements and the need for scale to compete. How do you view the potential for whole bank M&A as a role in Huntington's outlook and what's the earliest you think from an industry perspective, not necessarily for Huntington, that we can actually see a pickup in whole bank M&A given the backdrop and regulation?

Stephen D. Steinour: Last year's failures.

Stephen D. Steinour: So the regulatory requirements and the need for scale to compete and how do you view the.

Operator: One moment, please, while we poll for questions. Thank you. Our first question today is coming from the line of Manan Gosalia with Morgan Stanley. This is you with your question. Hi, good morning.

Stephen D. Steinour: Potential for.

Stephen D. Steinour: Whole bank M&A.

Speaker Change: As a role in Huntington.

Speaker Change: Logan and what's the earliest do you think from an industry perspective, not necessarily for Huntington.

Manan Gosalia: I wanted to start off on the expense guide change. I know it's a small change from 4% to 4.5%, but it is higher than some of your peers are guiding to for 2024. So I was hoping you could elaborate more on what's going into that. And also, if there is a similar flex on the expense side as there is on the revenue side, so for instance, if you get to your down 2% NII number with more rate cuts, does that drive a little bit of flex on the expense side as well? Great question, Manon. This is Zach.

Speaker Change: We think we can actually see a pickup in whole bank M&A, given the backdrop and regulators.

Speaker Change: Well, that's a series of questions, John. I'll try to answer them, but I may miss on one aspect. Let's just back up for a moment. You had three idiosyncratic banks fail.

Speaker Change: Well, that's a series of questions, John. I'll try to answer them, but I may miss one aspect. Let's just back up for a moment. You had three idiosyncratic banks fail.

Speaker Change: Well, that's a serious of questions John I'll try to answer them, but I may have missed on one aspect. This is backed up for a moment you had three idiosyncratic banks sale.

Speaker Change: <unk>.

Speaker Change: And you've seen the rest of the industry sort of adjust and adapt and respond very quickly and the core strength of the industry. I don't think is is in question now.

Speaker Change: For us we believe in having a very focused and disciplined.

Speaker Change: A broadly diversified set of businesses and.

Zachary J. Wasserman: I'll take that. The guidance that we had given back in October and in December was really primarily designed to be an early view for you so you could get an insight into some of the key decisions we were making and for us to really be able to discuss that in detail. That was the approximate 4% we discussed before. The finalization of our budget reflects the additional loan growth that we've now added to the plan and associated e-revenues as well. That's what represents the difference up to 4.5%. To give you a sense, it's about $5 million a quarter, so relatively small.

Speaker Change: <unk> been able to build those and achieve that.

Speaker Change: The posture and it has served us very very well as we've seen in the second half of last year and continuing into this year. So we're very bullish on our ability to organically grow and expect and Thats. Our focus will continue to do that you may see further announcements shrunk this year in terms of organic growth.

Speaker Change: Moves.

Speaker Change: And I expect that we will we will continue to be.

Speaker Change: Its contrarian.

Speaker Change: As we can as we continue to invest we think we have tremendous opportunities.

Zachary J. Wasserman: I think your, and by the way, the underlying drivers of that are unchanged from what we have discussed before. We'll continue to drive significant efficiencies in the core based on expenses across a number of programs. We'll continue to invest in our strategic growth initiatives. We'll execute on the incremental build of capabilities, automation, and data to get ahead of the coming regulations, and we'll execute on the new, really attractive commercial growth opportunities we've discussed before. All of that's included in that number, and there's no change to our expectation as well about reducing that growth rate as we go into 2025 back to more normalized levels. As it relates to your question in terms of the kind of marginal sensitivity, certainly, there will be some degree that.

Speaker Change: Already in the business lines that we have so in terms of scale I think the regulatory response.

Speaker Change: As is.

Speaker Change:

In reaction to those three failures.

Speaker Change: It is.

Speaker Change: Raising questions about how much salary will be industry data base will benefit from in the industry.

Speaker Change: Over time as the expectations have clearly increased as they should.

Speaker Change: And we are investing in our.

Speaker Change: Our risk management platform I think I shared on the third quarter call. For example, we will have much better intra day visibility of positive flows.

Speaker Change: In the near term as a consequence of a series of things like this.

Zachary J. Wasserman: I think the expense is generally calibrated to sort of the middle of the ranges we've got in growth and revenues. So, there is some potential upside to expenses if all of the revenues hit the high end, and likewise, some potential opportunity if the revenues went below. Great, thank you.

Speaker Change: We're addressing I don't know.

We've been investing in risk management since I arrived in 2009, so I don't know, how we compare really compared to other banks.

Speaker Change: We've always viewed the stress test results, where we've been top ports.

Speaker Change: Quartile or either levy in terms of the portfolio stresses.

Speaker Change: Regulators.

Butter and.

Speaker Change: And it looks like that was a very good better at least at this point so.

Zachary J. Wasserman: And my next question was on the deposit franchise. You have a pretty strong core consumer deposit franchise, and some of your peers have highlighted that there's still some lagged upward repricing in deposits there. So can you talk about how you expect those deposits to behave over the next few quarters and then as the Fed begins to cut rates? Yes, this is Zach. I'll take that one again.

Speaker Change: We're not anticipating.

Speaker Change: A change in posture at this stage, we don't feel compelled to.

Speaker Change: You have to do something.

Speaker Change: And yet at the same time.

Speaker Change: Should there be opex.

Speaker Change: Opportunity somewhere in the future, we take a look but it has to be.

Speaker Change: And our risk adjusted cost extra makes sense to us and.

Zachary J. Wasserman: You know, what we've been seeing in the marketplace broadly with respect to deposit costs and deposit data, both across consumer and commercial, is what you would expect, a deceleration of the sequential changes, and, very much for us, trending highly aligned to our expectations. As well, I will tell you that we are beginning to see in the marketplace a fairly constructive initial sign of firms preparing for what will likely be soon a down beta environment with a shortening, for example, of time deposit terms, with a change of promotional terms around money market, and select testing of different price points for unique segments and unique geographies, all of which is what you'd expect to presage will ultimately be a series of down beta With respect to your specific question on consumers,

Speaker Change: And I don't see that activity in 2004.

Speaker Change: I think we've got a tremendous core growth.

To deliver.

Speaker Change: And we're excited about that.

Speaker Change: Great. Thanks, Steve.

Great. Thanks, Steve.

Stephen D. Steinour: Thank you.

Speaker Change: Our next questions are from the line of Steven Alexopoulos with JP Works.

Our next questions are from the line of Steven Alexopoulos with Jpmorgan.

Steven A. Alexopoulos: With your question.

Steven A. Alexopoulos: Hey, good morning, everybody. Morning, Steven. I want to start for you with that big picture. So historically, a steep yield curve has been a positive catalyst for bank margins and earnings.

Steven A. Alexopoulos: Hey, good morning, everybody. Good morning, Steven. I want to start with you with that big picture. Historically, a steep yield curve has been a positive catalyst for bank margins and earnings. But given how you position the balance sheet right with the use of hedges, have you, in essence, traded away much of that potential benefit in order to have a more stable NIM today?

Steven A. Alexopoulos: Hey, good morning, everybody.

Alright.

Steven A. Alexopoulos: I wanted to start.

Steven A. Alexopoulos: For us that big picture, so historically, a steep yield curve has been a positive catalyst for bank margins and earnings.

Steven A. Alexopoulos: But given how you position the balance sheet right with the use of hedges, have you in essence traded away much of that potential benefit in order to have a more stable NIM today?

Steven A. Alexopoulos: Given how you've positioned the balance sheet right with the use of <unk>.

Steven A. Alexopoulos: Thats created a way much of that potential benefit in order to have a more stable NIM today.

Speaker Change: Great question, Steve. I think the short answer to your question is no. You know, a steeper yield curve continues to vent at us. Obviously, that environment would be indicative of, you know, funding costs, which would represent, you know, solid margins against where, you know, asset yields are. You know, I think, you know, we're in this really strange environment with inverted yield curves and with a dramatic, you know, kind of reduction forecasted, you know, pretty quick here. So we'll see how it all plays out. But I think for us, the puts and takes with respect to NIM outlook in the moderate term, 324, you know, one, we're going to continue to benefit very significantly from fixed asset repricing. I tried to provide some incremental clarity about that in the prepared remarks in the presentation. So you see 50 to 100 basis point moves in overall portfolio. The yield in the key effects categories will continue to see that benefit us out not only to 24, but to 25 and beyond. You know, another thing is.

Speaker Change: Great question, Steve. I think the short answer to your question is no. You know, a steeper yield curve continues to hound us. Obviously, that environment would be indicative of, you know, funding costs, which would represent, you know, solid margins against where, you know, asset yields are. You know, I think, you know, we're in this really strange environment with inverted yield curves and with a dramatic, you know, kind of reduction forecasted pretty quick here. So we'll see how it all plays out. But I think for us, the puts and takes with respect to the NIM outlook in the moderate term, 324, you know, one. We're going to continue to benefit very significantly from fixed asset repricing.

Speaker Change: Great question, Steve I think the short answer to your question is no.

Zachary J. Wasserman: So, will that trend? I think the answer is yes. You know, what we have been saying a lot is that deposit costs and beta will continue to trend at a decelerating rate through the pause period until such time as there is a rate reduction. And so, that's what our expectation as well. I will say that the go-to-market pricing is generally pretty consistent here, if not again, testing somewhat lower price points, but there's, of course, sort of an embedded momentum. There's a somewhat upward bias in terms of pricing for at least another quarter. And then we'll see.

Speaker Change: A steeper yield curve continues to benefit us obviously.

Speaker Change: That environment would be indicative of.

Funding costs, which are which would represent solid margins against where asset yields are.

Speaker Change: Thank you.

Speaker Change: It is really strange environment inverted yield curves.

Speaker Change: Got it.

Speaker Change: Reduction forecasted pretty quick here, so we'll see how it all plays out but I think for us the puts and takes with respect to NIM outlook in the in the moderate churn through 'twenty four one that we're going to continue to benefit very significantly from fixed asset repricing.

Zachary J. Wasserman: Do we get a rate cut in March? Somewhat aggressive in our view, but it's possible, in which case down beta begins very quickly. Does the rate environment hold out for the pause until September, in which case we'll see kind of a longer period of drift? Thank you.

Speaker Change: I tried to provide some incremental clarity about that in the prepared remarks in the presentation. So you see 50 to 100 basis point moves in the overall portfolio. The yield in the key effects categories will continue to benefit us out not only to 24, but to 25 and beyond. You know, another thing is

Speaker Change: Some incremental clarity about that in the prepared remarks in the presentation.

Speaker Change: Let me see 50 to 100 basis point moves in overall portfolio yield to keep ex categories will continue to see that benefit us.

Speaker Change: Not only is.

Erika Najarian: Thanks for your question. Our next questions come from the line of Erika Najarian with UBS. We'll see you with your questions. Good morning.

Speaker Change: 25 and beyond.

Speaker Change: Another thing is.

Speaker Change: For us, as the curve becomes less inverted, we'll see our negative carry from our down rate hedge protection program reduce. The negative carry impact, by the way, in Q4 was around 17 basis points of drag.

Speaker Change: For us.

Speaker Change: Out of the curve becomes less inverted you'll see our negative carry.

Erika Najarian: And by the way, whoever wrote that script, the guidance could not be any clearer, so that was great. With that being said, a few follow-up questions. You know, the loan growth guidance from your peers would imply, you know, that the macro outlook, which seems pretty consensus, you know, is indicative of, you know, softer opportunities. And perhaps this is a good chance, you know, clearly you've been telling us for the past few years that you've set yourself up differently, and you've set yourself up differently to outperform, and maybe go back through those opportunities that they think that, you Erika, this is Steve.

Speaker Change: Gallery hedge protection program reduce.

Speaker Change: I can assure you effectively in Q4 NIM was around 17 basis points of drag.

Speaker Change: We've talked about, likely we'll see about 10 bits of that come back to us.

Speaker Change: We've talked about, likely we'll see about 10 bits of that come back to us if you believe the scenario of a pretty aligned forward curve here over the next four quarters.

We've talked about likely we'll see about 10 gig so that come back to us.

Speaker Change: if you believe the scenario kind of pretty aligned forward curve here over the next four quarters.

We've a scenario pretty aligned with the forward curve here over the next.

Speaker Change: Four quarters.

Speaker Change: Thank you very much. Thank you very much.

Speaker Change: Thank you very much. Thank you very much is a positive phrase.

Speaker Change: <unk> costs.

Speaker Change: And a steeper yield curve environment.

Speaker Change: We're shortly.

Speaker Change: Fallen will really start to benefit us in terms of beginning to examine data actually executing on John <unk> question earlier.

Speaker Change: Those things a total essentially offset for us in our NIM.

Speaker Change: Variable yield reduction, we'll see if and when the short end comes down so I still believe that goldilocks scenario, but a nice upward sloping yield curve.

Stephen D. Steinour: I'll start with that because you asked for a broader history, and then Zach, you may go ahead. So first, we do think the discipline on our aggregate moderate to low-risk appetite, which has been in place now for 14 years, has been a governor, and it has helped us as we've decided what business to pursue and what not to seek. With that in mind, we've been very purposeful and strategic about growing these businesses, and you saw that on investor day amid teams rated profitable and, especially, banking. So we have a very strong middle market core banking set of capabilities. We have a tremendous amount of small business capabilities and capacity. We have market density in Ohio for small business, and we're achieving that now in other states.

Speaker Change: It is accretive to margins is supportive of it.

Speaker Change: And the goal. We've got here is the same just tried to really call out of the new year.

Speaker Change: 400.

Speaker Change: Really positioned for outside.

Speaker Change: What I can say is.

Speaker Change: So to your question as well.

Speaker Change: Modeling that we have done about 2025.

Speaker Change: Thanks for a while really highlight NIM expansion opportunities, which agenda.

Speaker Change: Indications of upward sloping yield curve.

Speaker Change: is positive.

Speaker Change: As positive.

Okay.

Speaker Change: That's helpful. Zach, I ask the question because earlier you said if the rates stay higher for longer, your NIM would be about 10 basis points higher in 2024 versus the Fed's cuts. But as we move beyond 2025, 2026, there's a clear benefit to the NIM. Are you able to quantify that for us, on a longer term basis? I'm assuming the forward curve played out. What's on and what's rolling off? Where could NIMH be long-term for hunting? Sure, yeah, but the point on the higher NIM and the scenario where it stays higher for longer is that it's not only a scenario where the short end stays higher for longer, but also the longer end stays higher for longer.

Speaker Change: That's helpful.

Speaker Change: Asked the question because earlier you said.

Speaker Change: Rates are higher for longer your NIM would be about 10 basis points higher in 2024 versus the fed cutting but as we move beyond 2025.

Stephen D. Steinour: So the core sort of regional banking franchise is performing very, very well. And you add to that these specialties that have been put in place, just three new ones last year, which, by the way, they're all off to terrific starts, and then the expansion. We've been in places like Dallas and Charlotte for a decade or more.

Clear benefits a minute are you.

Speaker Change: Are you able to quantify for us like on a longer term basis?

Speaker Change: To quantify for us like on a longer term basis.

Speaker Change: I'm assuming the forward curve played out.

Speaker Change: Assuming the forward curve laid out we've given.

Speaker Change: What's on and what's rolling off? Where the NIMH could be long-term for hunting?

Speaker Change: What's on and what's rolling off where the NIM could be long term for Huntington.

Stephen D. Steinour: When we see opportunities, we may pursue them. An example of that is in the Carolinas, where we believe we've got a fantastic group of new colleagues coming to us with teams. These are some just outstanding people that we've been following for years, and it all came together.

Speaker Change: Sure, yeah, but the point on the higher NIM and the scenario where it stays higher for longer, it's not only a scenario where short end stays higher for longer, but also longer end stays higher for longer. I will note that much of our balance sheet yield is keyed off the belly of the curve, the two to five year range, and so I think that's an important point to consider.

Speaker Change: Sure Yes.

Speaker Change: The point on the hire.

Speaker Change: Zero.

Speaker Change: One is it's not only a scenario where short end states, our Cologne, but also longer.

Speaker Change: I will note that much of our balance sheet yield is keyed off the belly of the curve, the two to five year range, and so I think that's an important point to consider. We'll go over the longer term. I see, you know, north of three, you know, into the low threes in terms of NIMS as a sustainable level. Of course, the business mix continues to shift, so I think it's hard to really be Precise about that, a priori, several years out, we'll have to continue to do our modeling, but over the foreseeable future, we see that range of sort of 3 to 3.10 in a quicker rate reduction scenario, maybe as much as 10 bps higher than that, if rates stay higher, it's longer through 24, and then I would see another step up into 25, assuming the yield is their folds generally as it's forecast.

Speaker Change: I will note that.

Stephen D. Steinour: We were investing, others were not, and there was a moment to be dynamic. In addition to that, we still have opportunities in these TCF markets. We're doing incredibly well in Michigan, but I would say we're in the early stage still in Chicago, the Twin Cities, and Denver, and we like each of those markets.

Speaker Change: Much of our balance sheet yield.

Speaker Change: The curve, which is the five year range.

Speaker Change: Yes.

Speaker Change: Et cetera.

Speaker Change: We'll go over the longer term. I see, you know, north of three, you know, into the low threes in terms of NIMS as a sustainable level. Of course, the business mix continues to shift, so I think it's hard to really be...

Speaker Change: Over the longer term.

Speaker Change: C E.

Speaker Change: North of three.

Stephen D. Steinour: So we believe with the investments we've made in specialty banking, and the core regional bank performing well with opportunities, we've got lots of growth potential in the next few years. And that's with the – I didn't talk about the asset finance business. Our distribution finance business is a horse. They had a phenomenal year last year.

Speaker Change: Into the low threes in terms of news as a sustainable level of course, the business mix continues to shift so I think it's hard to really be.

Speaker Change: Precise about that, a priori, several years out, we'll have to continue to do our modeling, but over the foreseeable future, we see that range of sort of 3 to 3.10 in a quicker rate reduction scenario, maybe as much as 10 bps higher than that, if rates stay higher, it's longer through 24, and then I would see another step up into 25, assuming the yield is their folds generally as it's forecast.

Speaker Change: Precise about that.

Speaker Change: We already several years out we will have to continue to do our modeling.

Stephen D. Steinour: Our auto business is one of our best businesses. We've got one of our really terrific teams in that area, and FortPlan has done very, very well in terms of its growth as well. So lots of growth options. Equipment finance more broadly, there are a lot of growth options in that, and you're seeing that through the cycle. And so we believe we're poised to outperform and budget for it and expect our colleagues to do so in the coming years. This is – I just want to talk about a few things.

Speaker Change: Over the foreseeable future, we see that range of 7%.

Speaker Change: Ted.

Speaker Change: Quicker rate reduction scenario, maybe as much as 10 gets tighter than that.

Speaker Change: They are longer through 'twenty, four and then I would see.

Speaker Change: Another step off into 'twenty five.

Speaker Change: Assuming the yield curve holds Jim.

Speaker Change: Sure.

Speaker Change: Okay, great. Thanks for taking my questions.

Speaker Change: Thanks for taking my question.

Zachary J. Wasserman: First of all, thanks for the compliment in terms of the guidance, and all the credit to our really terrific investor relations team. But just – one thing I would add on top of that is – We were pretty purposeful about staying on a growth footing across the board, and importantly in terms of the financial resources and investment that we were putting against our core growth opportunities, and, you know, recognize that the net outcome of that, including some of the other things that we want to do in terms of data and automation capabilities, would result in an overall expense growth that was higher than we would want to have relative to revenue growth, higher than we would typically target, and certainly was something we discussed at length, as you know.

Speaker Change: Thank you so much.

Speaker Change: Yes.

Speaker Change: Our next question is from the line of John Arfstrom with RBC Capital Markets.

Our next question is from the line of Jon <unk> with RBC capital markets behaved with your questions Hey, Thanks, Good morning.

Steve Sikorski: Steve Sikorski

Jon Arfstrom: Hey, thanks. Good morning. Good morning, John. A couple of guidance clarifications for you, Zach. When you say one key in that interest income is a trough,

Jon Arfstrom: Hey, thanks. Good morning. Good morning, John. I have a couple of clarifications for you, Zach. When you say that one key to that interest income is a trough,

Speaker Change: John.

Jon: Couple of guidance clarifications for exact.

Jon: When you say.

Jon: <unk> net interest income as a trough.

Jon: <unk>.

Speaker Change: How deep is that trough? How much lower? Where do you want us to start, I guess, for one or two?

Jon: How deep is that trough how much lower.

Jon: Yes.

What do you want us to start I guess for one or two.

Yes.

Speaker Change: Good question. Q1, by the way, is typically seasonally lower just with day count and just other mixed items. And so I think you'll probably see a level that is lower than Q4 by around the same amount that Q4 was lower than Q3 and then begin to grow from there. And so it's really the kind of trajectory from there that's really the major difference in the guidance range, given that if you just pull back, loan growth, I would expect in Q1 will be about the same year on year as we saw in Q4, I mean around 2%.

Speaker Change: Good question. Q1, by the way, is typically seasonally lower just with the day count and just other mixed items. And so I think you'll probably see a level that is lower than Q4 by around the same amount that Q4 was lower than Q3 and then begin to grow from there. And so it's really the kind of trajectory from there that's really the major difference in the guidance range, given that if you just pull back, loan growth in Q1 will be about the same year on year as we saw in Q4, I mean around 2%, and then steadily accelerating from there and ending the year growing at or even potentially above the high end of the loan growth range.

Speaker Change: Good question.

Speaker Change: Q1 by the way is typically seasonally lower day count and just some other mix items and so I think we'll probably see a level.

Speaker Change: This is lower than Q4.

Speaker Change: And the same amount.

Q4 was lower than Q3, and then begin to grow from there.

Zachary J. Wasserman: But we took that view purposefully, recognizing it was contrarian, because in our view, the long-term earnings potential of staying in that growth posture is so much more advantageous than were we to have really significantly ratcheted back investments and expenses. And so a bit of short-term challenge with respect to operating leverage will yield a very significantly better earnings growth trajectory through the course of 2024, and 2025. The earnings outlook looks exceptionally strong as well. So just to tack on Steve's point, I think the whole system is really working, and now you have some powerful results. For sure. And you had the capital.

Speaker Change: And so it's really that kind of trajectory from there that's really the major difference in the guidance range given that.

Speaker Change: Just pull back loan growth I would expect in Q1 will be about the same year on year as we saw in Q4 I E around 2%.

Speaker Change: and then steadily accelerating from there and ending the year growing at or even potentially above the high end of the loan growth range. The average should be the 3% to 5% that I discussed. There's a trajectory for sure during the year.

Speaker Change: And then sort of steadily accelerating from there.

Speaker Change: And ending the year growing.

Speaker Change: The average should be the 3% to 5% that I discussed. There's a trajectory for sure during the year. And likewise, in terms of NIM, I think it's likely that NIM will likely be at its lowest in the year in the first quarter and then kind of rise pretty heavily, depending on which scenario you look at. But that's a general trajectory I'm expecting.

Speaker Change: Thank you both.

The average should be three 5%.

Speaker Change: He was a trajectory for sure during the year.

Speaker Change: And likewise, in terms of NIM, I think it's likely that the NIM will likely be at its lowest one in the year in the first quarter and then kind of rise in pretty heavily depending on which scenario you look at. But that's a general trajectory I'm expecting.

Speaker Change: And likewise in terms of NIM.

Erika Najarian: So it all makes sense. And just a follow-up question. Again, so many moving pieces in terms of the rate outlook, but Zach, maybe update us on your rate sensitivity as of 12-31 after some of the moves that you made in terms of your balance sheet management, and also, if you could give us a little bit more detail about what you mean in terms of you know managing the betas on the way down with a similar discipline, and I wonder if you could give us, you know, maybe your expectations on deposit Sure. Great questions, both.

Speaker Change: It's likely that it will likely be at its lowest point of the year.

Speaker Change: First quarter, and then kind of horizon.

Speaker Change: Okay.

Speaker Change: And there you can look at.

Speaker Change: The general trajectory.

Speaker Change: Thank you.

Speaker Change: Okay, okay, good. I think it's important to set that up. And then on expenses, when you say consistent, you know, there's a lot of hand-wringing last quarter on your expense guide.

Speaker Change: Okay, okay, good. I think it's important to set that up. And then on expenses, when you say consistent, you know, there was a lot of hand-wringing last quarter on your expense guide. And when you say consistent, are you basically saying flatline expenses quarterly for 2024, meaning all the expenses? Investments and hiring and things that you've done are essentially in the run rate today, and you don't see a lot of these pressures as 24 progresses. Is that fair?

Speaker Change: Okay. Okay. Good.

Speaker Change: It's important to set that up.

Speaker Change: And then on expenses.

When you say consistent you know theres a lot of hand wringing last quarter on your expense guide.

Speaker Change: And when you say consistent, are you basically saying flatline expenses quarterly for 2024, meaning that all the expenses?

Speaker Change: And when you say consistent are you basically, saying flatline expenses quarterly for 2024, meaning that all of the expense.

Zachary J. Wasserman: There's a lot in there to unpack, so I think we can address those both. As it relates to asset sensitivity for December, I expect it to be roughly consistent with the asset sensitivity we saw that was reported in October, and you'll see that come out in the queue, sorry, in the K. As we've discussed over time, the business is naturally asset sensitive, and so clearly, on the way up with the industry cycle, we've benefited very significantly in terms of margin expansion and revenue growth. I will note as well, something just important to assess as you're thinking about asset sensitivity is in our security portfolio. As you know, we've hedged a large portion of our variable-for-sale securities, which have benefited significantly in terms of yields rising higher.

Speaker Change: Investments and hiring and things that you've done are essentially in the run rate today and you don't see a lot of these pressures as 24 progresses. Is that fair?

Speaker Change: Investments in hiring and things that you've done are essentially in the run rate today and you don't see a lot of these pressures as 24 progresses is that fair.

Speaker Change: That's an excellent one. I really appreciate the chance to clarify that. Broadly speaking, the answer is yes.

Speaker Change: That's an excellent question. I really appreciate the chance to clarify that. Broadly speaking, the answer is yes.

Speaker Change: That's an extra 5% just to clarify.

Speaker Change: <unk> speaking the answer is yes.

Speaker Change: The dollar amount of expenses overall we saw in the corporate system T4. The forecast we've got in our budget represents pretty similar dollar amounts overall for each of the quarters during 2024, coincidentally. There's In my mind's eye, to illustrate this picture for you, there are a variety of factors that are kind of offsetting each other and driving within that. I would say there's still a little bit of additional ramp-up of run rate, some of the incremental capability investments that we're doing. Likewise, a little bit of additional ramp-up in some of these new initiatives in the commercial business.

Speaker Change: The dollar amount of expenses overall with solid core business in Q4.

The forecast we've got in our budget represents pretty similar dollar amounts overall for each of the quarters during 2024 coincidentally.

There is.

Speaker Change: In my mind's eye, to illustrate this picture for you, there's a variety of factors that are kind of offsetting each other and driving within that. I would say there's still a little bit of additional ramp-up of run rate, some of the incremental capability investments that we're doing. Likewise, a little bit of additional ramp-up in some of these new initiatives in the commercial business. We're also actively tuning our overall strategic investments to modestly offset that. And then lastly, you've got these efficiency programs, which are accumulating in their impact over time. I think the business process reengineering initiative we've been driving for quite some time, internally we call it Operation Accelerate. The business process offshoring initiative, which by the way is also growing and accumulating. So there's sort of a series of factors that are netting together.

Speaker Change: In my Mind's eye illustrate this issue for you as a variety of factors that are kind of offsetting each other and driving within that I would say there is still a little bit of additional ramp up of run rate some of that incremental capability investments that we're doing likewise, a little bit of additional ramp up in some of these new initial.

Zachary J. Wasserman: You know, in terms of assets that are protecting capital, in the asset sensitivity metric, in the Dow 100 ramp scenario, for example, it represents about a percentage point of additional sensitivity from those swaps. Those swaps will roll off over the course of the next 12 to 18 months, and most of that impact and sensitivity will begin to ramp off starting the second half of 24 and continuing on for about a 12-month period thereafter. The other thing I'll just say as an important point is... Those sensitivity metrics are pretty academic and not standardized across the industry, with lots of assumptions, the beta being the most significant, but also whether those analyses are ramps on top of the forward curve, or whether they're just from a start point.

Speaker Change: Shifts in the commercial.

Speaker Change: We're also actively choosing.

Speaker Change: We're also actively tuning our overall strategic investments to modestly offset that. And then lastly, you've got these efficiency programs, which are accumulating in their impact over time. I think the business process reengineering initiative we've been driving for quite some time; internally, we call it Operation Accelerate. The business process offshoring initiative, which, by the way, is also growing and accumulating. So there's sort of a series of factors that are netting together, but the result of it is basically dollars that are pretty consistent within a pretty tight range.

Speaker Change: Our overall strategic investments to modestly offset that and then lastly, you've got these efficiency programs, which are cumulated user impact overtime.

Speaker Change: This business.

Speaker Change: Business process reengineering initiatives driving for quite some time and turn the call operation accelerates.

Speaker Change: Business process Offshoring initiative, which by the way is also growing accumulating so there's sort of a series of factors.

Speaker Change: Netting together.

Speaker Change: But the result of it is basically dollars that are pretty consistent with a pretty tight range.

Speaker Change: But the result of it as basically $1 <unk>.

Speaker Change: So it was pretty.

Speaker Change: Rich.

Zachary J. Wasserman: Ours is a ramp on top of the forward curve, so certainly advise that it's important to assess those assumptions pretty carefully in comparing those metrics across firms. Back to, so in terms of our balance sheet management posture, incrementally from here, I see the opportunity to add downside rate reduction hedges. You know, our hedging strategy is incrementally shifting from a focus on capital protection to a focus on down rate protection, as we discussed in the prepared remarks, and we added some of that in Q4. I suspect we'll continue to be gradually adding to those down rate protection strategies over time, which would gradually reduce downside asset sensitivity. In terms of deposit beta and what we would be expecting for the first, you know, X basis points, you know, our, to give you a sense, in the scenario that I'm looking at, where rates, in fact, begin to fall in March and then have five cuts in them, so it's a little more than your scenario, we would expect to see about a 20% roughly down beta over a three-quarter period by the end of 20 The sensitivity to your question is so clear. Thanks so much.

Speaker Change: Okay, good. Very helpful. Thank you very much. Thank you.

Speaker Change: Okay, good. Very helpful. Thank you very much. Thank you. Thank you.

Speaker Change: Okay got it very helpful. Thank you very much thank you.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you'd like to ask a question today, you may press star 1 for your telephone keypad at this time.

Speaker Change: As a reminder, if you'd like to ask a question today, you may press star 1 on your telephone keypad at this time.

Speaker Change: As a reminder, if you'd like to ask a question today you May press star one from your telephone keypad at this time.

Speaker Change: Best, please ask two questions, and if you have any return, you may...

Speaker Change: Best, Please ask two questions, and if you have any return, you may...

Speaker Change: And vast please ask two questions and then if you have any return you may tend to catch queue for follow up.

Speaker Change: Thank you for following.

Speaker Change: Thank you for following me.

Speaker Change: Thank you and our next question will be from the line of Matt O'Connor with Deutsche.

Speaker Change: Thank you, and our next question will be from the line of Matt O'Connor with Deutsche.

Speaker Change: Thank you and our next question will be from the line of Matt O'connor with Deutsche Bank. Please proceed with your questions.

Matt O'connor: We'll see you with your questions.

Matt O'connor: We'll see you with your questions. Good morning. This is Nate Stein on behalf of Matt. I just wanted to ask about commercial credit. Commercial real estate net charge-offs increased versus 3Q levels. Can you talk about what drove that and just touch on the outlook for commercial real estate credit quality this year? And then on the C&I side, these also continue to normalize. Can you talk about what you're seeing in this book? Sir Nick, this is Brendan. I'll take that. For the quarter, yes, we did see, on a basis point perspective, an increase in the commercial real estate side, but I want to sort of point you to the dollars there.

Matt O'connor: Good morning. This is Nate Stein on behalf of Matt. I just wanted to ask about commercial credit. Commercial real estate net charge-offs increased versus 3Q levels. Can you talk about what drove that and just touch on the outlook for commercial real estate credit quality this year? And then on the C&I side, these also continue to normalize. Can you talk about what you're seeing in this book?

Hey, Good morning. This is Nate I on behalf of Matt just wanted to ask about commercial credit.

Nate: Real estate net charge offs increased versus the <unk> level.

Nate: We'll talk about what drove that and just touch on the outlook for commercial real estate.

Nate: Credit quality this year and then on the C&I side. These also continued to normalize can you talk about what you're seeing in this book.

Matt O'connor: Sir Nick, this is Brendan. I'll take that. For the quarter, yes, we did see, you know, on a basis point perspective, there was an increase in the commercial real estate side, but I want to sort of point you to the dollars there. It was $20 million of charge-offs in the quarter, and it really represented three transactions. So, you know, it's consistent with our view of the real estate portfolio at this time, which is, you know, from a charge-off perspective, the focus will be in the office portfolio. That's where we think that there is potential for lost content, which is why we've increased our reserves to approximately 10% there. And so what you're seeing in the current quarter is sort of the manifestation of that message that we've been delivering for some time. When I take a step back and look more broadly, the portfolio on commercial in general is actually performing pretty well. I mean, the C&I side of the house has had, you know, its individual idiosyncratic issues, but in general, the strength of the portfolio is the result of our strong portfolio management and our low to moderate risk profile that we target. So I feel really good about the commercial portfolio at this time.

Brian Lawlor: My name is Brian and I will take that.

Brian Lawlor: Yes, we did see.

Brian Lawlor: On a basis point perspective.

Brian Lawlor: An increase in the questionnaire.

Brian Lawlor: Okay.

So plenty to the dollars there is $20 million charge offs in the quarter.

Matt O'connor: It was $20 million in charge-offs in the quarter, and it really represented three transactions. So, you know, it's consistent with our view of the real estate portfolio at this time, which is, you know, from a charge-off perspective, the focus will be on the office portfolio. That's where we think that there is potential for lost content, which is why we've increased our reserves to approximately 10% there. And so what you're seeing in the current quarter is sort of the manifestation of that message that we've been delivering for some time. When I take a step back and look more broadly, the commercial portfolio, in general, is actually performing pretty well.

Brian Lawlor: Representing III transaction so.

Brian Lawlor: Yes.

Brian Lawlor: With our view of the.

Brian Lawlor: Our real estate portfolio at this time wishes.

Brian Lawlor: From a charge off perspective, the focus will be in the office portfolio.

Brian Lawlor: A lot of content, which is why we have increased our reserves.

Brian Lawlor: There.

Brian Lawlor: And so what you're seeing in the current quarter.

Erika Najarian: Thanks for having me. Our next question is from the line of John Pancari with Evercore ISI. Good morning. On the capital front, I know you're 51 increased nicely, about 15 basis points to turn the quarter in the fourth quarter. Just as you look at your trajectory here and your outlook for earnings and capital, organic capital generation, how are you thinking about potentially ramping up buybacks? and capital return overall? Great question, John. Thanks. This is Zach.

Brian Lawlor: Sure.

Brian Lawlor: Message delivery for some time.

Brian Lawlor: Can you just step back and look more broadly at the portfolio on commercial in general.

Matt O'connor: I mean, the C&I side of the house has had its individual idiosyncratic issues, but in general, the strength of the portfolio is the result of our strong portfolio management and our low to moderate risk profile that we target. So I feel really good about the commercial portfolio at this time.

Brian Lawlor: Performing pretty well.

Brian Lawlor: Yes.

Brian Lawlor: The C&I side of the house.

Brian Lawlor: It's individual idiosyncratic.

Brian Lawlor: Issues.

Brian Lawlor: In general.

Brian Lawlor: Turning to the portfolio as a result of our strong portfolio management and low to moderate risk profile that we talk so I feel really good about the commercial portfolio.

John Pancari: I'll take that one. We're very pleased with the outcomes around the overall action plan we had with respect to managing capital and capital priorities throughout the course of 2023. As we've talked about, actively modulating the pace of loan growth to balance additional loan growth and revenue with also accreting capital on the balance sheet and clearly in the fourth quarter benefiting significantly from a recapture of AOCI, which allows us now to, even yet again, accelerate the pace of loan growth. As we discussed earlier, And for the foreseeable future, I see us continuing on with that posture, driving, you know, the most important capital priority And there is a significant opportunity for us to do that, which is the most value-creating decision that's in front of us, and, importantly, at 8.6%, our adjusted CET1 has been rising a lot, and we want to drive that into the 9-10% operating rate that we've discussed over time.

Brendan Lawler: So, Nate, Steve, the charge-offs, gross charge-offs, Q3 and Q4, were $2 million apart. It was very, very similar. The difference was in all of the recoveries. The pre-portfolios performing very well. The office portfolio has had minimal losses, 23 bips for the year. Cum charge-offs is outstanding. We're very pleased with how the performance has occurred, and we're confident going forward. Thanks for the question.

Brendan Lawler: So, Nate, and Steve, the charge-offs, gross charge-offs, Q3 and Q4, were $2 million apart. It was very, very similar. The difference was in all of the recoveries, with the pre-portfolios performing very well. The office portfolio has had minimal losses, 23 bips for the year. Cum charge-offs are outstanding. We're very pleased with how the performance has gone, and we're confident going forward. Thanks for the question.

Speaker Change: Certainly Steve.

Speaker Change: <unk>.

Right.

Gross charge offs Q3 to Q4 were $2 million.

Speaker Change: It was very very similar the difference was in all of the recoveries the three portfolios performing very well the office portfolio.

Speaker Change: It's had minimal loss was 23 bps for the year Q charge offs is outstanding we're very pleased with our performance.

Speaker Change: It has occurred and we're confident going forward. Thanks for the question.

Speaker Change: All right, thank you. And if I could just ask one follow-up on the criticized assets. So these also kicked up in the fourth quarter. Can you talk about what drove that?

Speaker Change: All right, thank you. And if I could just ask one follow-up question on the criticized assets. So these also kicked up in the fourth quarter. Can you talk about what drove that?

Speaker Change: Alright, Thank you and if I could ask one follow up on the criticized assets are these also.

Speaker Change: Yep.

Speaker Change: Fourth quarter.

Speaker Change: Can you talk about what drove that.

Speaker Change: You know, as this is spreading again, Nate, as Zach said in a pair of remarks, it really came out of our commercial real estate portfolio. You know, the impact of higher short-term rates has persisted, and that's what's reflected in those results. You know, again, we have been signaling through the second half of last year that we expected to criticize to move up, and that's exactly how it played out. You know, again, we have good confidence in our client selection in that portfolio, and, you know, solid reserve against it overall. So, you know, I guess I classify that as just more credit normalization across the portfolio.

Speaker Change: Yes.

Speaker Change: And again made.

The prepared remarks, it really came out of our commercial real estate portfolio.

Speaker Change: The impact of higher short term rates has persisted and thats whats reflected in those results.

Speaker Change: We have been signaling through the second half of last year that we expected to criticize it to move up and that's exactly how it played out.

Speaker Change: Again, we have confidence in our client selection in that portfolio.

Speaker Change: You know, again, we have good confidence in our client selection in that portfolio and, you know, a solid reserve against it overall. So, you know, I guess I classify that as just more credit normalization across the portfolio.

John Pancari: So I think for the foreseeable future, we'll continue on with that plan. Once we get into the 9-10% range with adjusted CET1, we'll reassess our posture with respect to share repurchases. Over time, share repurchases are a really important part of the value creation model for the company, and I absolutely expect us to get back to them, and we're going to drive through those outcomes as soon as we possibly

Speaker Change: Solid reserve against Joe, Rob So I guess.

Speaker Change: That is just more credit normalization across the portfolio.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Thank you for the question.

Speaker Change: Our next question is from the line of could you perhaps for a wallet with bank of America. Please proceed with your question.

Speaker Change: Our next question is from the line of Kiki Braham from Wallet with Bank of America. Please proceed with your question.

Kiki Braham: Hey, good morning. Good morning, Bruce. Just wanted to follow up on the loan growth guide, Steve. It does feel at the higher end of what we've seen over the last week from your peers. Sorry if I missed it, but...

Speaker Change: Hey, good morning.

Zachary J. Wasserman: And John, as Zach shared with you in the third quarter call, we are advancing it if the pending capital requirements are in place. So we're building capital now that will meet those requirements should they be adopted. Great. All right.

Hey, Brian.

Could you: Just wanted to follow up on the loan growth guidance.

Could you: It does feel at the higher end of what you've seen for the last week from your peers.

Speaker Change: Sorry, if I missed it but.

Steve: Give us a sense of how much of this is just market share gain that you expect versus the underlying growth that you're seeing in these markets and your expectations, I guess, tied to GDP growth. Well, we had growth last year of 2%. If anything, I think the signal from the Fed pivot will foster further loan growth for the industry. We are in an advantaged position, and so we'll capture a share of that, but we also have these specialty banking initiatives in the Carolinas, and they begin with no portfolio, so there's no prepayment or repayment risk, obviously, and that's all net loan growth, and those groups are off to terrific starts. We're very, very pleased with the quality of colleagues we've been able to attract to Huntington, and I'm quite confident in our teams, both the core teams that they'll deliver in our footprint, the specialty banking teams, and, frankly, our consumer lending teams are outstanding as well.

Speaker Change: Give us a sense department that this is just market share gain that you expect versus <unk>.

Stephen D. Steinour: And then also for you, Steve, related to that, maybe if you could just talk about the whole debate around the need for scale as you look longer term at the evolution that's going on right now within the regional bank space. Last year's failures and so the regulatory requirements and the need for scale to compete. How do you view the potential for whole bank M&A as a role in Huntington's outlook and what's the earliest you think from an industry perspective, not necessarily for Huntington, that we can actually see a pickup in whole bank M&A given the backdrop and regulation? Well, that's a series of questions, John. I'll try to answer them, but I may miss one aspect. Let's just back up for a moment.

Speaker Change: Underlying growth that Youre seeing in these markets and your expectation I guess that good GDP growth.

Steve: Well, we've had growth last year of 2%. If anything, I think the signal from the Fed pivot will foster further loan growth for the industry. We are in an advantaged position, and so we'll capture a share from that, but we also have these specialty banking initiatives in the Carolinas, and they begin with no portfolio, so there's no prepayment, repayment risk, obviously, and that's all net loan growth, and those groups are off to terrific starts. We're very, very pleased with the quality of colleagues we've been able to attract to Huntington, and I'm quite confident in our teams, both the core teams that they'll deliver in our footprint, the specialty banking teams, and frankly, our consumer lending teams are outstanding as well. So as we come into the year, we've got momentum, and we're going to continue to invest in these businesses, and that cumulative growth. It really should help us achieve or even exceed the goals.

Speaker Change: Well, we've had growth last year of up 2% and if anything I think the.

Speaker Change: The signal from the fed.

Speaker Change: We will foster further.

Speaker Change: Loan growth for the industry.

Speaker Change: In an advantaged position.

Speaker Change: And so we will capture share from that but we also have the specialty banking initiatives and the Carolinas.

Speaker Change: The whole portfolio, so theres no prepayment repayment.

Speaker Change: Risk, obviously, and that's all net loan growth, but those groups are off two terrific stocks were very very pleased with the quality of colleagues who've been able to attract the Huntington and I'm quite confident in our teams. Both the core teams that build delivered in our footprint, especially banking teams and frankly.

Steve: So as we come into the year, we've got momentum, and we're going to continue to invest in these businesses, and that cumulative growth should really help us achieve or even exceed our goals.

Speaker Change: Our consumer lending teams for outstanding as well so.

John Pancari: You've seen the rest of the industry sort of adjust, adopt, and respond very quickly. And the core strength of the industry, I don't think, is in question now. For us, we believe in having a very focused, disciplined, and broadly diversified set of businesses.

Speaker Change: As we come into the year, we've got momentum.

Speaker Change: To continue to invest in these businesses.

Speaker Change: It should help us achieve or even exceed the goals.

Speaker Change: Got it. And I guess what I didn't hear, Steve, was any mention of fiscal stimulus, the CHIPS Act, etc., flowing through your market. Is that not as meaningful going forward around moving the needle on growth?

Speaker Change: Got it. And I guess what I didn't hear, Steve, was any mention of fiscal stimulus, the CHIPS Act, etc., flowing into your market. Is that not as meaningful going forward around moving the needle on growth? The markets have, you know, broadly speaking, we're talking about 11, 12 states that we're in with our network, but here in Columbus, which is what you're referring to, the Intel plant, that plant is well under construction, and the supply chain commitments will largely be made this year as they move towards opening the following year. So we have some unusual factors that are strengthening the outlook here in greater Columbus, and we have, you know, very, very significant market share here and lead by a lot in most categories, but it will also benefit the broader region. And that's one of just many sectors that have chosen the Midwest.

Speaker Change: Got it and I guess, what I'd been KFC was any mention of.

Speaker Change: Fiscal stimulus.

Speaker Change: <unk> et cetera.

Speaker Change: Going to your market is that not as meaningful going forward around moving pieces on crude.

Stephen D. Steinour: And we've been able to build those and achieve that posture, and it has served us very, very well, as we saw in the second half of last year and this year. So we're very bullish on our ability to organically grow and expect, and that's our focus, that we'll continue to do that. You may see further announcements from us this year in terms of organic growth moves, and I expect that we will continue to be, maybe, a bit contrarian, but agile as we continue to advance. We think we have tremendous opportunities already in the business lines that we have.

Speaker Change: The markets have, you know, broadly speaking, we're talking about 11, 12 states that we're in with our network, but here in Columbus, which is what you're referring to, the Intel plant, that plant is well under construction, and the supply chain commitments will largely be made, we think, this year as they move towards opening in the following year. So we have some unusual factors that are strengthening the outlook here in greater Columbus, and we have, you know, very, very significant market share here and lead by a lot in most categories, but it will also benefit the broader region, and that's one of just many sectors that have chosen the Midwest. Think about batteries from East Michigan, Ann Arbor, through Columbus. And some of the announcements last year, including the Honda joint venture here in greater Columbus on the battery front. There's a lot of investment that's being made in the core footprint, all of which will generate economic benefit for the industry, and certainly for us with our leadership position in many of these areas. Thanks for the question.

Speaker Change: The markets have.

Speaker Change: Broadly speaking, we're talking about 11 states that we're in.

Speaker Change: With our network.

But here in Columbus, which is what you're referring into a plant that plant is.

Speaker Change: Well under construction as a supply chain commitments will largely be bank, we think this year as they move towards.

Opening in the following year. So so we had some unusual factors that are strengthening the outlook here and greater Columbus and we had.

Speaker Change: Very very significant market share here.

Stephen D. Steinour: So in terms of scale, I think the regulatory response, in reaction to those three failures, is raising questions about how much tailoring the industry or banks will benefit from in the industry over time. In fact, expectations have clearly increased, as they should, and we are investing in our risk management platform. I think I shared on the third quarter call, for example, that we will have much better intraday visibility of deposit flows in the near term as a consequence. There are a series of things like this that we're addressing. I don't know the—we've been investing in risk management since I arrived in 2009, so I don't know how we compare, really compare, to other banks. We've always viewed the stress test results, where we've been in the top quartile or even leading in terms of the portfolio stresses by the regulators, as a barometer, and it looks like that was a very good measure, at least at this point. So we're not anticipating a change in posture at this stage. We don't feel compelled to—we have to do something, and yet, at the same time, should there be an opportunity somewhere in the future, we'd take a look.

Speaker Change: Lead by a lot in most categories and but it will also benefit the broader region.

Speaker Change: And that's one of many.

Speaker Change: Sectors that have chosen the Midwest think about battery is strong.

Speaker Change: Think about batteries from East Michigan, Ann Arbor, through Columbus. And some of the announcements last year, including the Honda joint venture here in greater Columbus on the battery front. There's a lot of investment that's being made in the core footprint, all of which will generate economic benefits for the industry and certainly for us with our leadership position in many of these areas. Thanks for the question.

Speaker Change: East, Michigan Ann Arbor through Columbus.

Speaker Change: And some of the announcements last year, including the joint.

Speaker Change: Joint venture here and greater Columbus on batteries.

There's a lot of investment that's being made in the core footprint all of which will.

Speaker Change: Generate economic benefit for the industry and so forth.

Speaker Change: For the industry and certainly for us with our leadership position in many of these areas.

Speaker Change: Thanks for the question.

Speaker Change: Thank you.

Speaker Change: Thank you. I think we're hitting the top of the hour. I'm just going to wrap up. I want to thank you very much for joining us today. In closing, we're pleased with the fourth-quarter results as we dynamically managed through this environment. We believe we're well positioned. The investments we made in 23 will further drive revenue growth in 24 and beyond. Our focus is on driving core revenue growth, carefully managing expenses to support investments in the business, and growing loans consistent with our aggregate moderate to low-risk appetite. The management team is focused on executing our strategies that we have previously shared.

Speaker Change: Thank you.

Speaker Change: So I think we're hitting the top of the hour. I'm just going to wrap. I want to thank you very much for joining us today. In closing, we're pleased with the fourth quarter results as we dynamically managed through this environment. We believe we're well positioned. The investments we made in 23 will further drive revenue growth in 24 and beyond. Our focus is on driving core revenue growth, carefully managing expenses to support investments in the business, and growing loans consistent with our aggregate moderate to low-risk appetite. The management team is focused on executing our strategies that we previously shared. And as a reminder, the board executives, our colleagues, we're top-ten shareholders, and that creates strong long-term alignment with our shareholders generally. And finally, we're grateful to our nearly 20,000 exceptional colleagues who delivered these outstanding results and our perennial award winners for customer service. Thank you all very much. Appreciate your interest in Huntington. Have a great day.

So I think we're hitting the top of the hour and I was just going to wrap I want to thank you very much for joining us today.

Speaker Change: In closing, we're pleased with our fourth quarter results as we dynamically manage through this environment, we believe we're well positioned.

Speaker Change: Once we made a 23 will further drive revenue growth in 'twenty four and beyond our focus is on driving core revenue growth carefully managing expenses to support investments in the business and growing loans consistent with our aggregate moderate to low risk appetite. The management team is focused on executing our strategies that we've previously shared and is it.

Stephen D. Steinour: It has to be in a risk-adjusted context that makes sense to us, and I don't see that activity in 24. I think we've got a tremendous amount of core growth to deliver, and we're excited by that.

Speaker Change: And as a reminder, the board executives, our colleagues, we're top-ten shareholders, and that creates strong long-term alignment with our shareholders generally. And finally, we're grateful to our nearly 20,000 exceptional colleagues who delivered these outstanding results and our perennial award winners for customer service. Thank you all very much. I appreciate your interest in Huntington. Have a great day!

Speaker Change: Reminder, the board executives, our colleagues were put to the shareholders and that creates strong long term alignment with our shareholders generally and finally, we are grateful to.

Steven A. Alexopoulos: Thanks, Steve. Thank you. Our next questions are from the line of Steven Alexopoulos with JP Works. Hey, good morning, everybody.

Zachary J. Wasserman: Morning, Steven. I want to start with that big picture. Historically, a steep yield curve has been a positive catalyst for bank margins and earnings. But given how you position the balance sheet right with the use of hedges, have you, in essence, traded away much of that potential benefit in order to have a more stable NIM today? Great question, Steve. I think the short answer to your question is no.

Our nearly 20000 central colleagues to deliver these outstanding results.

Speaker Change: Perennial award winners for customer service. Thank you all very much I appreciate your interest in high school and have a great day.

Speaker Change: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Zachary J. Wasserman: You know, a steeper yield curve continues to hound us. Obviously, that environment would be indicative of, you know, funding costs, which would represent, you know, solid margins against where, you know, asset yields are. You know, I think, you know, we're in this really strange environment with inverted yield curves and with a dramatic, you know, kind of reduction forecasted pretty quick here. So we'll see how it all plays out.

Zachary J. Wasserman: But I think for us, the puts and takes with respect to the NIM outlook in the moderate term, 324, you know, one, we're going to continue to benefit very significantly from fixed asset repricing. I tried to provide some incremental clarity about that in the prepared remarks in the presentation. So you see 50 to 100 basis point moves in the overall portfolio. The yield in the key effects categories will continue to benefit us out not only to 24, but to 25 and beyond. You know, another thing is.

Zachary J. Wasserman: For us, as the curve becomes less inverted, we'll see our negative carry from our down rate hedge protection program reduce. The negative carry impact, by the way, in Q4 was around 17 basis points of drag. We've talked about, likely we'll see about 10 bits of that come back to us, if you believe the scenario of a pretty aligned forward curve here over the next four quarters. Thank you very much.

Zachary J. Wasserman: Thank you very much. It is positive. That's helpful. Zach, I ask the question because earlier you said if the rates stay higher for longer, your NIM would be about 10 basis points higher in 2024 versus the Fed cutting rates. But as we move beyond 2025, 2026, there's a clear benefit to the NIM. Are you able to quantify this for us on a longer term basis? I'm assuming the forward curve played out. What's on and what's rolling off? Where could the NIMH be used long-term for hunting?

Zachary J. Wasserman: Sure, yeah, but the point on the higher NIM and the scenario where it stays higher for longer is that it's not only a scenario where short ends stay higher for longer, but also longer ends stay higher for longer. And I think, I will note that much of our balance sheet yields are keyed off the belly of the curve, the two to five year range, and so, you know, I think that's an important point too to consider. We'll go over the longer term. I see, you know, north of three, you know, into the low threes in terms of NIMS as a sustainable level. Of course, the business mix continues to shift, so I think it's hard to really be...

Zachary J. Wasserman: Precise about that, a priori, several years out, we'll have to continue to do our modeling, but over the foreseeable future, we see that range of sort of 3 to 3.10 in a quicker rate reduction scenario, maybe as much as 10 bps higher than that. If rates stay higher, it's longer through 24, and then I would see another step up into 25, assuming the yield is their folds generally as it's forecast. Thanks for taking my question. Thank you so much. Our next question is from the line of John Arfstrom with RBC Capital Markets. Steve Sikorski: Hey, thanks.

Jon Arfstrom: Good morning. Good morning, John. A couple of clarifications for you, Zach. When you say one key in that interest income is a trough, how deep is that trough? How much lower? Where do you want us to start, I guess, for one or two? Good question.

Zachary J. Wasserman: Q1, by the way, is typically seasonally lower just with day count and just other mixed items. And so I think you'll probably see a level that is lower than Q4 by around the same amount that Q4 was lower than Q3 and then begin to grow from there. And so it's really the kind of trajectory from there that's really the major difference in the guidance range, given that if you just pull back, loan growth in Q1 will be about the same year on year as we saw in Q4, I mean around 2%, and then steadily accelerating from there and ending the year growing at or even potentially above the high end of the loan growth range. The average should be the 3% to 5% that I discussed. There's a trajectory for sure during the year.

Zachary J. Wasserman: And likewise, in terms of NIM, I think it's likely that NIM will likely be at its lowest in the year in the first quarter and then kind of rise pretty heavily, depending on which scenario you look at. But that's a general trajectory I'm expecting. Okay, okay, good. I think it's important to set that up.

Jon Arfstrom: And then on expenses, when you say consistent, you know, there was a lot of hand-wringing last quarter on your expense guide. And when you say consistent, are you basically saying flatline expenses quarterly for 2024, meaning that all the expenses? Investments and hiring and things that you've done are essentially in the run rate today, and you don't see a lot of these pressures as 24 progresses. Is that fair?

Zachary J. Wasserman: That's an excellent question. I really appreciate the chance to clarify that. Broadly speaking, the answer is yes. The dollar amount of expenses overall we saw in the corporate system T4. The forecast we've got in our budget represents pretty similar dollar amounts overall for each of the quarters during 2024, coincidentally. There are, in my mind's eye, to illustrate this picture for you, a variety of factors that are kind of offsetting each other and driving this.

Zachary J. Wasserman: I would say there's still a little bit of additional ramp-up of run rate on some of the incremental capability investments that we're doing. Likewise, a little bit of additional ramp-up on some of these new initiatives in the commercial business. We're also actively tuning our overall strategic investments to modestly offset that. And then lastly, you've got these efficiency programs, which are accumulating in their impact over time. I think the business process reengineering initiative we've been driving for quite some time; internally, we call it Operation Accelerate. The business process offshoring initiative, which, by the way, is also growing and accumulating. So there's sort of a series of factors that are netting together.

Zachary J. Wasserman: But the result of it is basically dollars that are pretty consistent with a pretty tight range. Okay, good. Very helpful. Thank you very much.

Jon Arfstrom: As a reminder, if you'd like to ask a question today, you may press star 1 on your telephone keypad at this time. Best, please ask two questions, and if you have any return, you may...

Operator: Thank you for following. Thank you, and our next question will be from the line of Matt O'Connor with Deutsche. We'll see you with your questions. Good morning.

Matt O'connor: This is Nate Stein on behalf of Matt. I just wanted to ask about commercial credit. Commercial real estate net charge-offs increased versus 3Q levels. Can you talk about what drove that and just touch on the outlook for commercial real estate credit quality this year? And then on the C&I side, these also continue to normalize. Can you talk about what you're seeing in this book? Sir Nick, this is Brendan.

Brendan Lawler: I'll take that. For the quarter, yes, we did see, you know, on a basis point perspective, there was an increase in the commercial real estate side, but I want to sort of point you to the dollars there. It was $20 million in charge-offs in the quarter, and it really represented three transactions. So, you know, it's consistent with our view of the real estate portfolio at this time, which is, you know, from a charge-off perspective, the focus will be on the office portfolio. That's where we think that there is potential for lost content, which is why we've increased our reserves to approximately 10% there. And so what you're seeing in the current quarter is sort of the manifestation of that message that we've been delivering for some time.

Brendan Lawler: When I take a step back and look more broadly, the commercial portfolio, in general, is actually performing pretty well. I mean, the C&I side of the house has had its individual idiosyncratic issues, but in general, the strength of the portfolio is the result of our strong portfolio management and our low to moderate risk profile that we target. So I feel really good about the commercial portfolio at this time. So Nate, Steve, the charge-offs, gross charge-offs, Q3 and Q4 were $2 million apart. It was very, very similar.

Stephen D. Steinour: The difference was in all of the recoveries, with the pre-portfolios performing very well. The office portfolio has had minimal losses, 23 bips for the year. Cum charge-offs are outstanding. We're very pleased with how the performance has gone, and we're confident going forward. Thanks for the question. All right, thank you. And if I could just ask one follow-up question on the criticized assets. So these also kicked up in the fourth quarter. Can you talk about what drove that?

You know, as this is spreading again, Nate, as Zach said in a pair of remarks, it really came out of our commercial real estate portfolio. You know, the impact of higher short-term rates has persisted, and that's what's reflected in those results. You know, again, we have been signaling through the second half of last year that we expected the benchmark to move up, and that's exactly how it played out.

Brendan Lawler: You know, again, we have good confidence in our client selection in that portfolio and, you know, a solid reserve against it overall. So, you know, I guess I classify that as just more credit normalization across the portfolio. Thank you for the question. Our next question is from the line of Kiki Braham from Wallet with Bank of America. Please proceed with your question. Hey, good morning.

Kiki Braham: Good morning, Bruce. Just wanted to follow up on the loan growth guide, Steve. It does feel at the higher end of what we've seen over the last week from your peers.

Stephen D. Steinour: Sorry if I missed it, but... Give us a sense of how much of this is just market share gain that you expect versus the underlying growth that you're seeing in these markets and your expectations, I guess, tied to GDP growth. Well, we had growth last year of 2%. If anything, I think the signal from the Fed pivot will foster further loan growth for the industry. We are in an advantaged position, and so we'll capture a share of that, but we also have these specialty banking initiatives in the Carolinas, and they begin with no portfolio, so there's no prepayment or repayment risk, obviously, and that's all net loan growth, and those groups are off to terrific starts. We're very, very pleased with the quality of colleagues we've been able to attract to Huntington, and I'm quite confident in our teams, both the core teams that they'll deliver in our footprint, the specialty banking teams, and, frankly, our consumer lending teams are outstanding as well.

Stephen D. Steinour: So as we come into the year, we've got momentum, and we're going to continue to invest in these businesses and that cumulative growth. It really should help us achieve or even exceed the goals. Got it. And I guess what I didn't hear, Steve, was any mention of fiscal stimulus, the Chips Act, et cetera, flowing through your market. Is that not as meaningful going forward around moving the needle on growth?

Stephen D. Steinour: The markets have, you know, broadly speaking, we're talking about 11, 12 states that we're in with our network, but here in Columbus, which is what you're referring to, the Intel plant, that plant is well under construction, and the supply chain commitments will largely be made this year as they move towards opening in the following year. So we have some unusual factors that are strengthening the outlook here in greater Columbus, and we have, you know, very, very significant market share here and lead by a lot in most categories, but it will also benefit the broader region. And that's one of just many sectors that have chosen the Midwest. Think about batteries from East Michigan, Ann Arbor, through Columbus.

Stephen D. Steinour: And some of the announcements last year, including the Honda joint venture here in greater Columbus on the battery front. There's a lot of investment that's being made in the core footprint, all of which will generate economic benefits for the industry and certainly for us with our leadership position in many of these areas. Thanks for the question. Thank you. So I think we're hitting the top of the hour. I'm just going to wrap this up.

Stephen D. Steinour: I want to thank you very much for joining us today. In closing, we're pleased with the fourth quarter results as we dynamically managed through this environment. We believe we're well positioned. The investments we made in 23 will further drive revenue growth in 24 and beyond. Our focus is on driving core revenue growth, carefully managing expenses to support investments in the business, and growing loans consistent with our aggregate moderate to low-risk appetite. The management team is focused on executing our strategies that we previously shared.

Operator: And as a reminder, the board executives, our colleagues, we're top-ten shareholders, and that creates strong long-term alignment with our shareholders generally. And finally, we're grateful to our nearly 20,000 exceptional colleagues who delivered these outstanding results and our perennial award winners for customer service. Thank you all very much. I appreciate your interest in Huntington. Have a great day. Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Q4 2023 Huntington Bancshares Inc Earnings Call

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