Huntington National Bank 2012 Annual Report Download - page 35

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Business Overview
General
Our general business objectives are: (1) grow net interest income and fee income, (2) increase cross-sell and share-of-wallet
across all business segments, (3) improve efficiency ratio, (4) continue to strengthen risk management, including sustained
improvements in credit metrics, and (5) maintain strong capital and liquidity positions.
We were pleased with the financial results in 2012, which reflected steady growth in a number of key areas including loans,
deposits, and customer relationships as well as improved profitability. This growth has occurred in a challenging economic and
regulatory environment. It demonstrates the continued benefits from successfully executing our long-term strategic plan, including the
investments we have made during the previous three years. Those investments added over $50 million of pretax income during 2012
and we expect that benefit to grow as those investments continue to mature. While some businesses are hesitant to invest given the
current uncertainty in the economy, we believe our differentiated approach to banking, combined with investing in our franchise
through enhanced products and services, will drive growth and improvement of our long-term profitability.
As is the nature of a mature industry with arguably overcapacity, we continue to face strong competition from other banks and
financial service firms in our markets. To address these challenges, the cornerstone of our strategy has been to invest in the franchise
in order to grow our market share and share-of-wallet. In this regard, our OCR methodology continued to deliver strong success in
2012. Consumer checking account households grew 12.2%, and our cross-sell performance continued to improve. At the end of the
year, 78.3% of our consumer checking account households utilized over four products. This compared with 73.5% a year earlier.
Growth in commercial relationships was 9.2% in 2012. At the end of the year, 35.0% of our commercial relationships used over four
products or services, up from 31.4% a year earlier. Our “Fair Play” philosophy, combined with continued OCR success, while
positively impacting 2012 results, also positions us for better long-term performance.
Economy
We continue to see positive trends within our Midwest markets relative to the broader United States. Nevertheless, broad based
customer sentiment began to change in late 2012, due to increased concerns regarding the U.S. economy. While some businesses are
hesitant to invest given the current uncertainty in the economy, we believe our differentiated approach to banking, combined with
investing in our franchise through enhanced products and services, will drive growth and improvement of our long-term profitability.
Generally, our footprint large metropolitan statistical areas (MSA) unemployment rates were below the national average as of
November 2012. In addition, FHFA housing prices were up in the 2012 third quarter relative to the same quarter of last year in all of
our footprint states, except Pennsylvania, which was essentially unchanged. Strong affordability and continued economic growth
should support continued housing recovery in 2013, as long as risks to the overall U.S. economy are contained.
Legislative and Regulatory
Regulatory reforms continue to be adopted which impose additional restrictions on current business practices. Recent actions
affecting us include the banking regulators’ BASEL III proposal and deferral, FRB and OCC capital plans and stress testing rules, and
CFPB rules governing consumer mortgage lending. A comprehensive discussion of legislative and regulatory matters can be found in
the Regulatory Matters section included in Item 1 of this Form 10-K.
2013 Expectations
We expect to continue seeing the strong growth of the Midwest economy relative to the broader United States. However,
business sentiment continues to be negatively influenced by the uncertainty in Washington and its direct impact on the U.S. economy.
We remain optimistic that when solutions are in place, the strength of the Midwest and the soundness of our strategy will continue to
drive growth.
Net interest income is expected to modestly grow over the course of 2013, after experiencing its usual first quarter seasonal
decline, as we anticipate an increase in total loans, excluding the impact of any future loan securitizations. However, those benefits to
net interest income are expected to be mostly offset by downward pressure on our net interest margin. The net interest margin is not
expected to fall below the mid 3.30%’s due to continued deposit re-pricing and mix shift opportunities, while maintaining a
disciplined approach to loan pricing.