Huntington Bancshares CEO: ‘It’s a great time to be doing business’ in the Midwest

Huntington Bancshares CEO Steve Steinour joins Yahoo Finance Live to discuss company earnings, economic recovery in the Midwest, inflation, supply chain and labor constraints, and Fed rate hikes.

Video Transcript

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- Interest rates are on the rise, which could have major implications for earnings at the country's biggest banks. Let's talk more about this with Huntington Bancshares CEO, Stephen Steinour. Stephen, always great to get some time with you. So you and your team and your bank branches are right in the heartland of America. A lot of small businesses, medium-sized businesses dealing with high levels of inflation. How is the economy looking from that standpoint?

STEPHEN STEINOUR: The economy looks very, very strong, and there's a lot of economic activity going on. It's supply chain constrained, labor constrained. And it's been this way for a couple of years. There's a lot of manufacturing on-shoring or reshoring, and then there's economic development activity. We've never seen this level of activity here in central Ohio. We have the Intel multiple chip announcements, so they announced two at $20 billion at the start of the year.

There's a site development set for another six, so a total of $100 billion. And then there'll be suppliers on top of that. And we've got a lot of other economic activity Amgen announced Facebook's doing an expansion of their data center. It's just a lot going on in the Midwest, and I'm focused here in Columbus at the moment with those comments. Say the same thing about Detroit or Indianapolis or Cincinnati or Cleveland, so it's a great time to be doing business here.

- And Steve, it's Julie here. It's good to see you. So you guys experienced commercial loan growth, which is not something that all banks have been able to say. Is that indeed a function of where you are and the character of the small business community where you guys are located?

STEPHEN STEINOUR: I think our colleagues have just done a great job serving our clients over an extended period of time. And that has set up relationships, and we are a relationship-oriented bank. And we did a large acquisition last year of TCF Financial, and that has given us depth in Michigan and Chicagoland and expansion markets, great markets, like the Twin Cities in Minnesota and Denver as well. So on many of our markets, we're across the board growing. Certainly, for small businesses, this has been a good period of economic recovery since the pandemic started a couple of years ago.

- Steve, how difficult is it to staff bank branches right now in this tight labor market?

STEPHEN STEINOUR: Well, everybody's having staffing challenges. You look at restaurants or manufacturers, distributors, everybody, and that includes us with bank branches. So we're asking a lot of our colleagues. We've done a lot on compensation and benefits. We'll continue to do that. We're putting an extra $1,000 into 401(k)s across the company this quarter, for example. And there'll be other activities that we'll look to do to help our colleagues get through this inflationary period.

- So let's look forward a little bit and look at not just the inflationary pressure but the rising rate period. Right? Which can be sort of a blessing and a curse for a bank like yours. On the plus side, obviously you've got expanded net interest margin. On the downside, can be a crimp on growth. So how are you expecting that to play out over the coming six months to a year?

STEPHEN STEINOUR: Our business lines are very well-positioned in this regard. We are number six or seven in terms of equipment finance, so a lot of automation to supplant the lack of labor is going to occur. It's in process. More of that will occur in the Midwest as industrials reshore. A lot of that will be in the Midwest. Then we have one of the largest inventory finance businesses, dedicated inventory finance businesses, that support dealers around the country. There are about 14,000 dealers we support and a number of OEMs, so that business will do very well.

Then the nature of a relationship business, we've seen now with just-in-time inventory that it works great until it doesn't it. And when it doesn't, it's a big problem. So you're going to see inventory build across the spectrum, I think. And we've got a half million business customers, many of whom are going to have to continue to build inventory or will have higher payrolls. They're going to need more working capital or other forms of support. And we're beautifully positioned. We've got a lot of capital and liquidity to help them.

- Steve, are you concerned that we could be nearing a recession?

STEPHEN STEINOUR: I'm not at this stage. Now, it depends on how much the Fed does, how quickly they do, what quantitative tightening occurs. And of course, we're not immune to what's going on in the tragedy in Ukraine and the knock-on effect in Europe.

But for the things that we see and can control, we really like the future over certainly '22 and potentially beyond. Many of our customers are dealing with backlogs into '23, some into '24. So we're in an expansionary moment, and it's not just this year. And if the Fed orchestrates its soft landing and brings inflation under control, I think it's going to be a great couple-- it has the potential to be a great couple of years.

- Steve, good to see you. Steve Steinour is Huntington Bancshares's chairman and CEO. Thanks for your time this morning.