Risk should map to an observable signal
| Risk | Signal | Interpretation rule |
|---|---|---|
| deposit competition | deposit balances/costs | Escalate when the signal persists and changes underlying economics |
| credit deterioration | NIM | Escalate when the signal persists and changes underlying economics |
| commercial real-estate exposure | charge-offs | Escalate when the signal persists and changes underlying economics |
| interest-rate mismatch | criticized loans | Escalate when the signal persists and changes underlying economics |
| regulatory capital changes | CET1 | Escalate when the signal persists and changes underlying economics |
| cybersecurity | commercial real-estate trends | Escalate when the signal persists and changes underlying economics |
Macro transmission
Federal Reserve policy, the yield curve, unemployment, commercial real estate, auto credit and regional economic activity materially affect results.
Thesis breakers
- Persistent deterioration in net interest margin that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in average deposits that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in deposit beta/cost that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in loan growth that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in net charge-offs that is not explained by seasonality or a temporary cycle.
Quarterly monitoring checklist
- deposit balances/costs
- NIM
- charge-offs
- criticized loans
- CET1
- commercial real-estate trends
- efficiency ratio
References
- Huntington Investor Relations: https://ir.huntington.com/
- Huntington SEC filings: https://www.sec.gov/edgar/browse/?CIK=49196&owner=exclude
- Nasdaq Composite Index overview: https://indexes.nasdaq.com/Index/Overview/COMP
- Nasdaq Composite Index Methodology: https://indexes.nasdaq.com/docs/methodology_COMP.pdf