Morgan Stanley Cuts Huntington Bancshares To Equal-weight As Sees Catalysts Lacking

Morgan Stanley on Thursday issued a company update on Huntington Bancshares Incorporated (NASDAQ: HBAN) ahead of the Federal Reserve's meeting on interest rates next week. Morgan Stanley downgraded Huntington Bancshares from Overweight to Equal-weight and issued a $12.50 price target.

Shares traded recently at $11.16, up 0.9 percent.

Analysts Ken Zerbe and Steven Wald wrote, "The market has recognized the consistent progress HBAN has made with the shares outperforming peers...given our expectation for in-line loan growth...and peer-average EPS growth through 2019...we believe the shares will perform in-line with the peer group."

Morgan Stanley believes Huntington's strength has been driven by strong loan growth over the last five years and improvements in credit. However, due to the expectation of rising interest rates and a slowdown in loan growth, Morgan Stanley believes that the company lacks the necessary catalysts to outperform its competitors.

The analysts note that there is a possibility of its stock price outperforming expectations due to acquiring either a fast growing business or a company where meaningful expenses can be removed. However, the analysts also believe Huntington's efficiency ratio, which continues to be in the middle of the pack of competitors, may lead to weakness in its business operations.

Overall, while Morgan Stanley thinks that Huntington will continue to report solid earnings, there isn't growth opportunities available to support a higher valuation in shares.