Huntington Bancshares (HBAN)

Total return at 5 years: 11.6%/year = 7.9% appreciation + 3.7% dividend. The target price ($23) is ex-dividend; the $3 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $33 · Multiples $21) exceeds the market price ($15).

Today — fairly valued: at $15 trades ~26.5% below its value discounted to today (~$21); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($23) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$13.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($15) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-9.6%/year) than we project (7.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$1.4 bn of owner earnings in year 5 (vs ~$3.2 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Year 0 = TTM to 30-Jun-2026, re-based from the 8-K of 23-Jul-2026 (FY2025 + cumulative H1-2026 − cumulative H1-2025, from levels). TTM earnings (US$2,246 million to common) are depressed by integration costs from the Veritex (closed Oct-2025) and Cadence Bank (closed Feb-2026, an all-stock exchange) acquisitions: the second quarter of 2026 alone carried US$152 million pre-tax of non-recurring items, and that quarter's adjusted earnings per share (US$0.39) exceeded the reported figure (US$0.33) by 18%. Year 1 of the path picks up the contribution of a full year of Cadence plus the final phase of the cost savings —management itself noted that "by the fourth quarter, the full earnings power of these partnerships will be evident"—; no explicit numerical revenue or earnings per share guidance for fiscal 2026 was found in the release, so the starting point anchors to the trajectory of adjusted earnings rather than to reported growth, which is distorted by two acquisitions closed within the TTM window. The diluted share count rose ~38% year over year on the stock exchange with Cadence; the share path assumes moderate buybacks once the integration is complete, funded with retained earnings.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $23 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $15, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $23 in 5 years plus $3 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $21. Against the current market price ($15), the margin of safety is 26.5% (trades below the maximum → there is margin) and the total return at that price would be 11.6% annually.

• Entry multiple. Trades near 14× on TTM earnings depressed by integration costs, not on adjusted earnings.
• Expected 5-year return. The base case projects a total return (price plus dividend) of +12% annually.
• Dividend yield. $0.62 per share annually, stable since 2022, on a price of $17.55: current yield of approximately 3.5%.
• Sensitivity to the exit multiple. The 5-year value is sensitive to the terminal multiple (10.0x to 13.5x by scenario), reflecting that adjusted quality is not yet confirmed in reported numbers.

• Return on tangible capital. 14.3% four-quarter average, compressed by integration costs; 17.5% adjusted in the most recent quarter, above the 10% bar.
• Cash generation / earnings. Reported earnings differ from adjusted earnings by $152 million pretax of non-recurring items in the second quarter of 2026 alone.
• Reinvestment runway. Recent scale growth came from acquisitions, not organic reinvestment in the branch network.
• Loan portfolio quality. Net charge-offs of 0.25% of average portfolio and reserve coverage over nonaccruals of 213%, both healthy.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

For a bank, net interest margin is the central profitability metric: deposit and loan volume determines the base to which the margin is applied, and the efficiency ratio measures how much of that income is consumed by operating expenses. The four drivers show the same phenomenon from different angles: a scale jump from acquisitions that has not yet fully settled into the efficiency ratio, which should normalize as conversion and integration costs wind down.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent revenue growth. TTM revenue of $9,718 million, +16.8% year over year, almost entirely from the Veritex and Cadence acquisitions.
• Underlying organic growth. Not explicitly broken out in the earnings release; the projected path assumes deceleration toward mature-bank mid-single-digit growth.
• Commercial pipeline. Management describes a robust pipeline of business entering the second half of 2026 and early revenue synergies in Cadence markets.
• Share dilution. The diluted count rose ~38% year over year from the Cadence stock exchange, a direct headwind for EPS.

• Deposit position in core markets. First place in Columbus (44%) and Akron (28%); second in Cleveland (12%), per FDIC data as of Jun-2025.
• Scale after Veritex and Cadence. Assets nearly doubled in twelve months, to nearly $284 billion; footprint from 14 to 21 states.
• Commercial credit concentration. 60% of the total portfolio is commercial credit, more cycle-sensitive than residential mortgages.
• Product differentiation. Proprietary products (24-Hour Grace, Standby Cash) under Fair Play Banking, replicable by competitors over the medium term.
• Competition from non-bank fintechs. The filing itself describes it as non-traditional but increasingly strong for depositors and borrowers.

• ✓Capital adequacy (CET1)CET1 10.0% (+3.0pp above the minimum)
• !Reserve coverage (allowance / loan book)1.43% of the loan book
• ✓Credit quality (net charge-off rate)0.25% annually
• !Value creation (ROTCE − 10% bar)+4pp
• ✓Funding (deposit base)Deposits $222.5 bn

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

ⓘ Has a loan book: credit health (delinquency, coverage, normalized CECL, RoA/RoE) is evaluated separately, not with corporate solvency.

• Regulatory capital (CET1). 10.0% as of Jun-30-2026 (estimated), above well-capitalized bank minimums, though down from 10.5% a year earlier due to integration.
• Credit reserve coverage. ACL equivalent to 213% of nonaccrual loans, a wide cushion.
• Asset quality. Nonperforming asset ratio of 0.85%, up from 0.63% a year earlier due to the incorporation of acquired portfolios.
• Efficiency ratio. 61.5% in the most recent quarter, elevated by Cadence conversion and integration costs.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Capital use over the past twelve months was dominated by the dividend ($0.62/share annually, stable since 2022) and by integrating the two recent acquisitions, the larger of which (Cadence) was paid in stock and did not directly consume liquid capital. Buybacks resumed in 2026 ($309 million in the first half) once the systems conversion was completed, a signal that management considers regulatory capital already at the post-merger target level.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO tenure. Stephen Steinour in the role since 2009; led the post-crisis recovery and now two large mergers.
• Integration execution. Cadence systems conversion completed Jun-2026, but full earnings power is not yet visible in reported numbers.
• Ownership alignment. No controlling shareholder; majority passive institutional ownership (Vanguard and BlackRock ~16% combined) and modest executive holdings.
• Buybacks resumed post-integration. $309 million bought back in the first half of 2026, a signal that regulatory capital is already at the target level.

• Forced/technical selling: merger arbitrage funds and some indices that received Huntington shares in the Cadence exchange tend to sell regardless of value, generating supply pressure that does not reflect the business fundamentals
• Reported earnings depressed by non-recurring costs: $152 million pretax in integration items in the second quarter of 2026 alone conceal earnings that are 18% higher on an adjusted basis
• Market skepticism over execution of a large merger: investors tend to wait to see cost savings confirmed in the numbers before recognizing the value, and management itself notes the full proof will only arrive toward the fourth quarter of 2026

No numerical revenue or earnings-per-share guidance for fiscal 2026 was found in the earnings release; the analysis relies on the most recent quarter's adjusted earnings and management's qualitative commentary on the pace of integration.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +3%/year (+18% total): the margin of safety protects the downside. The bull (+17%/year, +116% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Merger integration risk. The projected cost savings from Veritex and Cadence must materialize; execution is still underway.
• Commercial credit concentration. 60% of the total portfolio, more sensitive to an economic cycle downturn.
• Share dilution. Diluted count +38% year over year from the Cadence exchange, a direct drag on per-share value until synergies are confirmed.
• Interest rate risk. Net interest margin and the value of available-for-sale securities are sensitive to rate movements.
• More demanding regulatory category. Upon surpassing $250 billion in assets, it moves to Category III, with stricter capital and liquidity standards.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROTCE 14% above the 10% bar, but the margin is limited (+26%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a PEG of 2.0 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -10% vs our 7%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -1%/yr, bull-scenario ceiling +13%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: cost advantage, efficient scale, switching costs, intangibles → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -10%, within what we project (7%) — the story squares with the numbers.