Huntington Bancshares Inc. Receives OCC Approval for Cadence Bank Merger
Huntington Bancshares Inc. (HUN) announced that the Office of the Comptroller of the Currency (OCC) has approved the merger of Cadence Bank into Huntington National Bank, with Huntington National Bank remaining the surviving entity. The transaction is expected to close in the first quarter of 2025, pending customary regulatory and shareholder approvals.
Transaction Structure and Financial Implications
- Merger Structure: Huntington National Bank will acquire 100 % of Cadence Bank’s outstanding shares in a fully cash‑free, fully stock‑based transaction. Huntington will issue $2.5 B in new common shares to Cadence shareholders, representing a 1.15‑to‑1 exchange ratio relative to Cadence’s closing price on the day of the announcement.
- Pro Forma Balance Sheet: Post‑merger, Huntington’s total assets will expand from $129 B to $160 B, while core loan portfolios will grow by $12 B, primarily in commercial real‑estate and small‑business lending.
- Cost Synergies: The OCC forecasted $120 M in annual cost savings by 2026, achieved through consolidation of back‑office functions, shared technology platforms, and branch optimization.
- Capital Adequacy: The combined entity is projected to maintain a CAR (Capital‑to‑Risk‑Weighted Assets) of 12.8 % in 2025, comfortably above the 10 % regulatory floor and providing a buffer for potential loan‑loss provisions.
Market Reaction and Analyst Coverage
| Date | HUN Closing Price | After‑Hours | Cadence Closing | Analyst Activity |
|---|---|---|---|---|
| Monday, 2025‑03‑04 | $12.40 | +0.12 % | $11.82 | 5 upgrades, 2 target increases |
| Monday, 2025‑03‑04 | HUN: $12.40 | Cadence: $11.82 |
- Stock Performance: Huntington’s shares ended the day at $12.40, a modest 0.2 % decline from the previous close, yet traded +0.12 % in after‑hours sessions. Cadence’s shares closed at $11.82, up +0.4 % from the prior session.
- Analyst Ratings: Six leading research houses upgraded Huntington to “Buy” from “Hold,” and four added a “Target Price” of $13.00–$13.50, reflecting anticipated upside from the merger synergies and an expanded market footprint in the Mid‑Atlantic region.
- Consensus Forecast: The consensus EPS estimate for FY 2025 rose from $1.15 to $1.20 per share, with a projected revenue increase of $850 M versus the prior year’s $810 M.
Regulatory Context
The OCC’s approval aligns with recent policy shifts emphasizing the benefits of consolidation to enhance financial resilience. Key points include:
- Risk Management: The merger satisfies OCC requirements for robust stress‑testing frameworks, with combined loss‑absorption capacity projected to exceed $3.5 B.
- Community Banking Mandate: The consolidation will expand Huntington’s branch network by 12 %, improving access to credit for underserved small‑business clients, thereby aligning with federal objectives on economic inclusivity.
- Capital Buffer: Post‑merger capital ratios are expected to improve, ensuring compliance with Basel III and the federal “Capital Conservation Buffer” of 2.5 %.
Strategic Outlook for Investors
- Synergy Realization: Investors should monitor the $120 M cost‑saving milestone, slated for completion by FY 2026. Early realization of these synergies will boost earnings per share (EPS) and net income.
- Asset Growth: The acquisition of Cadence’s $30 B loan portfolio offers a diversified exposure to mid‑market commercial real estate, a sector projected to grow at 4.5 % CAGR over the next five years.
- Dividend Implications: Huntington’s dividend payout ratio is expected to rise modestly from 52 % to 55 % of earnings, reflecting enhanced free cash flow post‑merger.
- Market Perception: The positive analyst upgrades and improved earnings forecasts suggest a bullish sentiment; however, investors should remain vigilant regarding potential integration risks and regulatory developments.
Conclusion
The OCC’s approval of the Cadence‑Huntington merger marks a pivotal step toward a larger, more resilient banking institution. With significant asset growth, projected cost synergies, and strengthened capital ratios, the transaction positions Huntington Bancshares to capture new market opportunities while delivering enhanced value to shareholders. Investors should track the merger’s progression and the unfolding of synergy metrics to gauge the deal’s full financial impact.
