RBC Capital Maintains Huntington Bancshares Incorporated

RBC Capital on December 19, 2025 maintained Outperform coverage of Huntington Bancshares Incorporated - Preferred Stock (HBANL), with an average one-year price target of $30.73 (range $22.85–$36.42), implying 19.51% upside from the closing price of $25.71. Projected annual non-GAAP EPS is $1.42. Institutional ownership remains at 30 funds (unchanged quarter-over-quarter) with total institutional shares down 3.09% to 4.211M and average portfolio weight rising to 0.48% (up 11.8%); major ETF holders include PFF (1,029K shares, -9.01%), PGX (503K, -4.85%) and PFFD (361K, +27.63%).

Analysis

Market structure: HBANL is a direct beneficiary if investor appetite for bank preferreds recovers—RBC’s 19.5% upside and concentrated ETF ownership (PFF 1,029K, PGX 503K, PFFD +27% quarter) signal demand from income-focused products while institutional direct holdings fell ~3.1%, implying short-term supply from repositioning. Losers include holders of bank common equity and new-issue subordinated debt if yield-sensitive capital rotates into senior preferreds; pricing power shifts to existing, liquid preferreds while new issuance could pressure spreads if rates fall.

Risk assessment: Tail risks include a regional-bank stress event or regulatory reclassification of preferreds (low‑probability, high‑impact), rapid 10yr T‑yield acceleration (>75–100bp in 90 days) that would widen preferred spreads >200bp, and issuer call or dividend suspension risk tied to HBAN common capital strain. Immediate risk (days–weeks) is ETF-driven flow volatility; short‑term (1–3 months) is Fed direction and 10yr moves; long term (6–18 months) is credit cycle and potential calls.

Trade implications: Tactical long in HBANL makes sense at current levels (25.71) with a target to RBC’s $30.73 within 6–12 months; size 1–3% portfolio. Use a defined‑risk options structure if timing is uncertain: 9–12 month 27.5/32.5 call spread. Pair trades: long HBANL vs short HBAN common to hedge macro/systemic bank risk; alternatively overweight PFFD/PGX for diversified preferred exposure.

Contrarian angles: Consensus underweights the impact of ETF rebalancing and liquidity: continued ETF outflows (PFF -9% position q/q) can create transient dislocations and buying opportunities. Historical parallels show preferreds can snap higher after rate stabilization; conversely, if 10yr breaks above 4.5% persistently, preferreds may rerate sharply—price thresholds and volatility hedges are essential.

Key Decisions for Investors

• Establish a 1–3% portfolio long position in HBANL at or below $27.00 (current $25.71); take profits toward $30.73 within 6–12 months and cut position if price falls below $22.75 or if the 10‑year Treasury rises >75bp in 90 days.
• Implement a relative‑value pair: long HBANL (notional X) / short HBAN common (notional ~0.5X) for 3–6 months to capture seniority and income repricing while hedging bank‑system risk; rebalance if HBAN common outperforms by >15%.
• Buy a defined‑risk 9–12 month call spread (example strikes 27.5/32.5) sized to equal desired exposure (equivalent to 1–2% portfolio) to play upside to RBC’s target with capped downside.
• Rotate modestly into preferred ETFs (PFFD, PGX) if seeking diversified preferred exposure: add 1–2% to PFFD/PGX on pullbacks >3% in preferred segment, but reduce ETF exposure if PFF/PXF report consecutive outflows or if preferred-to-Treasury spread widens >200bp.