Huntington's Inflection: Cadence Conversion Complete, Revenue Synergies Begin to Surface

An Inflection Point

Huntington entered the second quarter of 2026 with a pivotal milestone behind it: the “successful completion of the Cadence systems conversion” — Stephen Steinour, Chairman, President, and Chief Executive Officer · 2026-07-23 just 140 days after closing. The bank used the event to reframe its narrative from integration execution to organic growth acceleration. As CEO Steve Steinour put it, “We are now at an inflection point.” The market, however, was less effusive — the stock fell 5% on the day as management guided net interest income to the low end or below its prior range, citing “the biggest single change in our outlook around NIM is deposit costs and the pricing environment around that” — Zach Wasserman, Chief Financial Officer · 2026-07-23. This tension — strong revenue momentum but margin pressure — defines the quarter and the outlook.

The Cadence footprint is already yielding tangible results. Deposits grew during the conversion weekend, and the bank has begun to convert that scale into revenue. In capital markets alone, “we've completed more than 10 transactions with customers in the Cadence footprint, generating approximately $12 million of fees” — Brant Standridge, President of Consumer and Regional Banking · 2026-07-23. Payments, treasury, and wealth are following the same trajectory. President of Consumer and Regional Banking Brant Standridge highlighted that checking household acquisition in the new footprint nearly doubled since February, and that core franchise deposit production is retaining roughly 80% of maturing CDs. The synergy story is no longer just about cost saves; it is about building a core funding engine that powers future growth.

The Cost of Growth

The flip side of that growth is expense inflation. Non-interest expense rose 54% year-over-year, pushing the efficiency ratio higher despite strong revenue. Management is confident the cost synergies will flow, but the near-term margin trajectory is under pressure. CFO Zach Wasserman reiterated that Q2 represents the NIM trough, expecting the margin to expand modestly into the 320s basis points by Q4. The bank is also proactively managing auto loan production because returns don't meet its disciplined thresholds — a reminder that earnings power is being prioritized over volume.

That discipline is reflected in the fundamentals. Effective revenue is up 26% YoY, but operating income is down 2% because expenses are running ahead of revenue. This is the classic integration-year squeeze — the market is paying for the future synergies, but the P&L is still digesting the past. The bank's guidance implies that Q4 will be the inflection point: a synergy realization moment when the combined cost base and accelerated fee growth finally translate into margin expansion.

Fees to the Rescue

While NII is the primary challenge, fee income is the counterweight. Value-added fee revenues grew 60% YoY, and even excluding acquisitions and divestitures, organic fee growth was 30%. Payments grew 10%, wealth 12%, and capital markets a stunning 46%. Management now expects fees to track at the high end or above guidance, which could offset part of the NII shortfall. As Wasserman noted, “We have multiple levers,” and the fee engine is clearly one of the most important.

This diversification is a deliberate strategy. The bank has invested heavily in payments, wealth, and capital markets, and those investments are paying off. The earnings growth trajectory increasingly depends on these less capital-intensive businesses, which also support the 18-19% ROTCE target and continued tangible book value growth.

The market's skepticism may be short-sighted. The stock trades at just over one times book and 14 times earnings, with a tangible book value growing at a high single-digit clip. Management is deploying buybacks aggressively, repurchasing $550 million this year and expecting $1.1-1.2 billion in 2027. When the cost synergies land and the revenue synergies compound, the current valuation may look extremely undemanding.

We are positioned to drive the next phase of value creation, with ROTCE forecasted in the 18%-19% range.

The next two quarters are the proof point. If Q4 delivers the promised earnings power, the transformation will be validated. For now, Huntington is a classic “show me” story — but the pieces are falling into place.