Huntington Bank CEO Stephen Steinour joins Yahoo Finance Live discuss the market outlook ahead of the Fed meeting and what Intel's new chip-making facility means for Ohio's economy.
- All right, shares of Huntington Bancshares are trying to rally back after the stock got hit by 9% on Friday on the company's earnings results and broader market pressure. Let's dive into the company's outlook with chairman, president, and CEO Stephen Steinour. Stephen, nice to see you. Thanks for joining us on this very busy Monday morning. You know, look, we always look through the prism of the stock market here at Yahoo Finance, and we're seeing this pressure on so many areas of the market. What does it look like from you, from an economic standpoint, in this country? Does it warrant this concern that we're seeing in stocks?
STEPHEN STEINOUR: Well, I think there's a significant overhang in Europe that's no doubt impacting this to some extent, and once things sort out on the Ukraine, hopefully at a very peaceful way, that's a major overhang that I think gets eliminated. The fundamentals look very good. As we said on the earnings forecast, we had a very strong finish to the fourth quarter, a big quarter for us, and a lot of pipeline, a lot of backlog, coming into the new year. So we're quite bullish around loan demand, which is a reflection of the growth of the underlying economy.
- And so Steve, it's Julie here. If I can get you to expand on that just a little bit, in particular because you guys are based in Ohio. So you have a different frame of reference, obviously, than us coastal folk. And so I'm curious what you're seeing from your small business clients, from your consumer clients, in terms of their financial health, particularly given the fact that they are now not getting the federal aid that they were a year earlier.
STEPHEN STEINOUR: Well, we're headquartered here in Columbus, but our commercial organization is headquartered in Detroit. And so we're really a broad based Midwest bank. And as we look at our customers throughout the states, they're doing fairly well. There are some exceptions, but they're doing well. 21 will prove to be a good year, and they're optimistic about 22 and moving forward. There's a lot of investment going in across the board. Our fourth quarter results were broad based across all our geographies and commercial lending units.
So that's really strong and encouraging in terms of the future.
- When you talk to folks in the region, Stephen, what are their biggest concerns? Is it getting labor into those manufacturing plants, given everything we are seeing with the variant? Is it Inflation? Is it a combination of those things?
STEPHEN STEINOUR: Brian, the number one issue is labor. This is a constrained recovery. It's been this way for a year and a half, and 22 looks like that will continue. It takes some time to adjust the labor factor by innovation and by a capital expenditure. And you're going to see that in the manufacturing environments, in particular. But we are in a good recovery. You know, this is a 3 1/2% 4+% GDP expectation for 22, two times normal. And yet, it's a labor constrained recovery. It would be much stronger if we had the labor.
- Steve, I got to ask you about interest rates. Of course, we've got a Fed meeting this week. The net interest margin in your last report seemed to be the one area that some investors were focusing on as disappointing relative to their expectations. How many times do you think the Fed is going to raise rates this year, and what is that going to mean for your business?
STEPHEN STEINOUR: Rising interest rates are very good for our business. As we said on the earnings call Friday, we have three in the model. The current expectation is four. There is some talk of not doing 25 basis points, but maybe a 50 at some point during the year. So the interest rate outlook, which is in part fueled by inflation, will continue to be an opportunity for us and other regional banks. Very bullish on what this means over time, and we're asset sensitive and increasingly so, which means as rates tick up, particularly in the short end, that will translate to additional revenue.
- Stephen, four rate hikes, potentially, this year, even have a lot of folks on the streets suggesting maybe we get five. What do you think that does to the economy?
STEPHEN STEINOUR: Well, I think it has some marginal impact. But remember, we're starting off a historical low. It's at 0 to 25 basis points. Now, much of my career, I've been in very different interest rate environments than we've seen in the last decade, and the economy has done well. There'll be a period of adjustment, and then we'll move forward. I'm quite bullish about the-- there's been so much investment in in the US. There's been so much federal stimulus in the US. The onshoring of jobs, the chip plant announcement last week is a reflection of that that's occurring here in Columbus, or central Ohio.
So this bodes very well. I think we have an extended runway of really positive economic growth and opportunity for regional banks like Huntington.
- Well, speaking of that investment, Stephen, that Intel plant, $20 billion initial investment could go up to $100 billion by Pat Gelsinger's team over at Intel. What does that mean for jobs in the Ohio economy?
STEPHEN STEINOUR: No, this is transformational. This is massive. So it's not just those, those-- if they do the five plants, which is the $100 billion, that is enormous. Think about this, $100 billion in a 2000-acre site, but they'll also bring the other suppliers that are critical to them. That's another 40, 50 companies that will come in. And there's a co-location potential for other chip manufacturers because of the infrastructure bill that's associated with this.
It is a game changer. Pat Gelsinger has made a massive commitment, and I don't think we know how big this could be. If we look at Chandler, Arizona, you know, a couple of thousand people that today is hundreds of thousands of people. That's the potential of what we're talking about here. So enormously important decision and an incredibly robust set of opportunities for us throughout Central Ohio for the next couple of decades. It's a game changer, and we're in-- this is our headquarters.
This is incredible, and we have lead share. This is incredibly helpful to us.
- Well, real good real good to see these types of large investments being made in this country. Huntington Bancshares chairman, president, and CEO Stephen Steinhauer, good to see you. We'll check back with you soon.