Huntington Bancshares outlook changed to negative after Cadence deal

Moody's Ratings affirmed Huntington Bancshares' ratings but revised its outlook to negative following the bank's announced all-stock acquisition of Cadence Bank, citing incremental operational and execution risks due to the deal and the incomplete integration of a prior acquisition. Concurrently, Moody's placed Cadence Bank's ratings on review for upgrade, expecting alignment with Huntington's upon the Q1 2026 closing. While the acquisition presents short-term integration challenges and a slight increase in commercial real estate concentration, Moody's acknowledged potential long-term benefits from Cadence's strong Southern market presence and Huntington's eventual Category III regulatory status, which is expected to strengthen its credit profile over time.

Analysis

Moody's Ratings affirmed Huntington Bancshares' (HBAN) long-term senior unsecured debt rating at Baa1 but revised its outlook to negative from stable for its banking subsidiary's long-term deposits. This change follows HBAN's announced all-stock acquisition of Cadence Bank (CADE), expected to close in Q1 2026. Concurrently, Moody's placed Cadence Bank's Baa2 long-term issuer rating and baa1 standalone Baseline Credit Assessment on review for upgrade, anticipating alignment with Huntington's ratings post-merger.

The negative outlook for Huntington stems from incremental operational and execution risks associated with integrating Cadence, especially as HBAN's prior acquisition of Veritex Holdings (VBTX) is not yet fully integrated. Cadence's total assets, loans, and deposits each represent over one-quarter of Huntington's, indicating a significant integration challenge. Additionally, the acquisition is expected to moderately increase Huntington's commercial real estate concentration.

Despite short-term concerns, Moody's identified potential long-term benefits, citing Cadence's strong franchise in robust Southern economies like Texas, which will provide a significant growth platform. Post-transaction, Huntington will become a Category III institution, subjecting it to more stringent regulatory requirements, which Moody's believes will strengthen its credit profile over time. Management projects the transaction to be "mildly dilutive" to regulatory capital, with little change to its 10.6% common equity tier 1 ratio.

Key Decisions for Investors

• Investors should closely monitor Huntington's integration progress of both Cadence and Veritex, as operational and execution risks are key drivers of the negative outlook.
• Assess the long-term strategic value of the Cadence acquisition, particularly the growth potential in Southern markets and the impact of enhanced regulatory oversight as a Category III institution.
• Consider the implications of increased commercial real estate concentration and management's "mildly dilutive" capital estimate on HBAN's overall risk profile and capital adequacy.