Huntington Cuts Prime to 6.75% — What it Means for the Bank and Its Investors

Huntington Bancshares (HBAN) said it is lowering its prime rate to 6.75% from 7.50%, effective Dec. 11, according to a company press release distributed on PR Newswire. For investors, the move is a clear signal that the bank expects lending yields to soften and is positioning itself for an interest-rate environment that may be shifting — a change that could pressure short-term profit margins while easing borrowing costs for customers.

Immediate market response and trading context

The announcement landed in regular trading hours and prompted a modest but visible reaction. HBAN shares moved on the news — trading showed a short-term dip as algorithmic and discretionary traders digested the implications for future earnings. Fixed-income markets also took note: short-term municipal and bank credit spreads widened slightly while Treasury yields at the front end ticked down, reflecting an expectation of softer near-term rate pressure.

Regional bank peers showed mixed behavior. Some smaller banks that track prime closely nudged their prime references in the same direction or issued statements saying they were monitoring the market. Volume around HBAN was above recent daily averages for a period after the release, a sign that the market regarded the move as material to the bank’s near-term outlook.

How this changes Huntington’s near-term economics

Dropping prime from 7.50% to 6.75% directly lowers rates on legacy variable-rate loans that reprice off prime. That means interest income on a swath of commercial and retail loans will start to roll down as customers move to lower payments. The immediate effect is downward pressure on net interest margin (NIM), the core profit measure for banks that captures the gap between what they earn on loans and what they pay on deposits.

How much NIM moves depends on timing. Huntington’s loan book that is indexed to prime will reprice at the cadence of contract resets — some loans reprice monthly, others less frequently. On the deposit side, many customer balances are sticky: core deposit rates often lag market moves, so deposit costs may not fall as fast as loan yields. That gap — loan yields falling faster than deposit costs — is the main channel for a near-term margin squeeze.

That said, the flip side is volume. Lower borrowing costs can stimulate loan demand, particularly for commercial lines and adjustable-rate consumer products. If loan growth picks up quickly, it can offset some margin pressure. For the next few quarters, expect earnings headlines to focus on loan yield trends, fee income stability, and any changes in deposit betas (how quickly deposit costs move with market rates).

How the move fits into the bigger rate picture

Huntington’s cut follows a string of moves by banks to adjust the prime they post after changes in market rates and in reaction to competitors. The bank trimmed prime earlier in late October and has been updating its reference as the Fed funds outlook and short-term funding costs evolve. Prime traditionally sits a fixed margin above the federal funds rate path, so banks change it when they expect the policy or market-driven reference to shift.

Across the industry, there is no single playbook. Some banks have kept prime higher, protecting near-term margins but risking slower loan growth. Others have cut more aggressively to chase volume. Huntington’s decision puts it in the camp of lenders prioritizing customer affordability and loan activity right now, which can be sensible during a slowing rate environment but raises immediate questions about margin resilience versus peers.

Investor watchlist: what to track next for HBAN

Investors should focus on a short list of metrics and dates that will show whether Huntington’s strategy is working or weighing on results:

• Next earnings report — look for loan yield and NIM guidance, and management commentary on loan repricing cadence and deposit betas.
• Loan growth and mix — a pick-up in commercial lines or consumer loans would offset some margin pain; watch growth in adjustable-rate lending.
• Deposit trends and cost of funds — rising deposit costs would widen the margin squeeze; falling deposit rates would help limit the damage.
• Credit quality signals — if lower rates spur growth but credit metrics deteriorate, the net effect could be negative for earnings.
• Regulatory or funding news — changes to wholesale funding spreads or regulatory guidance for banks can alter the outlook quickly.

Bottom line: Huntington’s reduction of its prime rate to 6.75% is a strategic choice that favors loan demand over immediate margin protection. For investors, the trade-off is clear — potential for higher loan growth against a likely near-term hit to NIM. Whether the stock benefits depends on the bank’s ability to convert cheaper loans into meaningful volume without seeing deposit costs climb or credit quality slip.

Photo: Engin Akyurt / Pexels

Sources

• prnewswire.com