Interest rates to stay 'higher for longer,' Huntington CEO Steve Steinour says
Huntington Bancshares' top executive is not looking for interest rates to drop anytime soon.
Credit inflation that has been stickier than expected along with continued solid economic growth for keeping rates higher than many had predicted even just a few months ago, said Steve Steinour, Huntington's chairman, president and CEO.
"It's a function in part that the economy is doing better than expected. ... This isn't all a bad news story," Steinour said Friday after the bank reported profit of $419 million, or 26 cents per share, for the first three months of 2024.
"The core strength in the U.S. economy is better than largely any other country in the world,’’ he said.
Forecasts that once called for six or even seven cuts in interest rates beginning as soon as last month have now been reduced to one or two. Some forecasts are now saying there won't be any cuts.
"What a significant change in outlook," he said.
Inflation has come down, but remains above the 2% target of the Federal Reserve, which Steinour praised for doing a good job of reducing inflation without the economy slipping into a recession.
Steinour said there may be one rate cut this year, but no more than that.
"We expect rates higher for longer,’’ he said.
The change in outlook means interest rates are higher for businesses and consumers borrowing money. Savers, meanwhile, are benefiting from higher rates for certificates of deposit.
The interest rate on a 30-year mortgage, for example, jumped above 7% this week.
While that's high compared with where rates have been in recent years, Steinour noted that the economy has functioned well in the past when interest rates have been this high.
For consumers looking to buy a house there are alternatives that can reduce high rates such as adjustable rates that consumers could use for now with a goal of refinancing in a couple of years when rates would be expected to be lower, he said.
"Home prices are up, and there's not a lot on the market,’’ he said. "It's really a buyer's challenge."
Steinour predicts that businesses will do well this year and that they've worked there way through having too much inventory last year.
"I expect businesses will have a good year this year. They will manage through rates," he said.
Those that are hurt the most by the higher rates continue to be lower and moderate-income families, Steinour said.
"Low and moderate-income households are feeling this. Other than being a source of strength, we can be supportive and help them work through it to get the other end of this," he said of the higher rates.
Collapsed bank fees hit Huntington profits
For the second straight quarter, the bank's profit was hurt by a special assessment from the Federal Deposit Insurance Corp. to recover costs from the failure of two big banks last year, Silicon Valley Bank in California and Signature Bank in New York.
The FDIC estimated that $16.3 billion was spent to protect deposits that were not insured from the two banks. As a result, it has hit the nation's biggest banks with special fees to replenish the fund that covers deposits in case of bank failures.
In the first quarter, the fee was $32 million, or 2 cents, a share. For the last three months of 2023, the fee was $214 million.
The adjusted earnings of 28 cents per share beat Wall Street estimates by 3 cents. Revenue of $1.8 million also topped analyst estimates.
Huntington shares were up more than 1% in trading Friday and have been trading near a 52-week high.
"We are in a position of strength," he said. "That means we can help consumers. We can help business … we’re doing our part to move the economy forward.’’
mawilliams@dispatch.com
@BizMarkWilliams
This article originally appeared on The Columbus Dispatch: Huntington CEO Steve Steinour sees interest rates 'higher for longer'
