3 Reasons You Should Buy This Regional Bank

While some banks have allowed its customer service fall by the wayside, Huntington Bancshares has proven that listening to customers is the best policy.

2013 wasn't just a good year for the stock market, it was a huge year for financials. And Huntington Bank is no exception, up 32% in the last 52 weeks. The question is, are we too late to get a piece of Huntington's run?

In short, I believe there's plenty of opportunity for Huntington to move. I'll dig into three reasons to buy Huntington Bank while comparing it to some regional heavy hitters like US Bancorp and PNC Financial .

1. A concentrated footprint
Huntington Bank is focused in the Midwest, with the largest percentage of its deposits in Columbus, OH. In fact, the bank has approximately 90% of its deposits concentrated inside of its footprint.

Huntington Bank Branch Locations -- Dec. 2013Create Infographics

There's certainly downside to being so concentrated. For instance, PNC suggested that it faces significant risk to, "adverse changes in economic conditions in the Mid-Atlantic, Midwest, and Southeast regions."

US Bank is the least exposed of the three banks, with its footprint spanning most of the western half of the United States.

With that said, there are also great advantages to being focused in one area of the country. Huntington Bank understands its customers better than any other bank, and has proven this by cross-selling and consistently gaining customer wallet share.

In the past several years we've seen significant pull back and branch closings due to overextended and inefficient networks. At that same time, banks like US Bank and Huntington Bank have continued to strategically gain market share within its footprint.

2. Competitive advantage in auto lending
As mentioned earlier, Huntington focuses its efforts within its footprint. That holds true for nearly everything except auto lending. The bank has top market share in the Midwest, and has been opportunistic in new regions as other banks have scaled back operations.

Nick Stanutz (Managing director of auto and real estate lending) explained that it's the dealership networks that have allowed Huntington to grow its auto lending business by double-digits over the last five years. An important business considering auto and real estate lending makes up 30% of Huntington's loan book.

Huntington has created a strong reputation for quick decisions on loans (most in less than 3 seconds), same day funding for dealers, and staff available during non-banking hours. Overall, Huntington has proven to be an ideal partner, and to dealerships that's worth a premium price.

3. It gets better
Stanutz predicted that, "2014 will be the fifth year of rising new car sales in the United States." He suggested that there's "tremendous" demand because the average car on the road today, "has over 150,000 miles on it."

This will be important to all three bank because, according to the Washington Business Journal, Huntington Bank, US Bank, and PNC all rank in the top 25 of auto lenders.

As Stanutz would go on to suggest, the auto business can be a great source of fee income. While Huntington, specifically, held all of its loans in 2013 it can very easily secure future loans to grow non interest income.

Which regional bank is your best buy?
All three banks have worked toward defining its footprint and focusing its efforts on cost cutting and profitability. And while each have great potential upside, I'm currently favoring Huntington Bancshares over PNC and US Bancorp.

While there are few banks that are better run that US Bank, and few with the potential upside of PNC, I like the customer-centric approach of Huntington Bank's CEO Steinour. I believe the valuation is reasonable, the bank will continue to take market share in its region, and leverage its strong auto lending business to gain brand recognition to grow its footprint.

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The article 3 Reasons You Should Buy This Regional Bank originally appeared on Fool.com.

Dave Koppenheffer has no position in any stocks mentioned. The Motley Fool owns shares of Huntington Bancshares and PNC Financial Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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