Huntington Corporate Ventures, the venture arm of Columbus, Ohio-based bank Huntington Bancshares, plays a critical role in the institution’s continued strategy to drive growth and efficiency, CFO Zachary Wasserman told CFO Dive.

The banking industry faces numerous headwinds, Wasserman said in an interview. First, liquidity is “scarce and more expensive.” Also, “the need to continue to enhance capabilities across the banking industry is increasing even as at the same time, there’s regulatory pressure, and changes coming down the pike in terms of capital, long term debt,” he said.

The uncertain economic environment and pressures in the banking sector have shined a brighter spotlight on the importance of innovation, Wasserman said.  

“We know that we need to continue to innovate, to drive growth and efficiency and to really be vibrant,” he said. “And so if anything, we’re simply leaning in that much more to the venture space.”

Opening access to the innovation economy

Begun in 2019, Huntington Corporate Ventures is an internal team which focuses on developing partnerships and ventures which can help to accelerate the bank’s business strategies. At the time of its creation, the aim was to craft “an enterprise utility that would sit at the top of the headquarter function and support the business segments to drive their strategies through partnership, through innovation,” Wasserman said. He has served as the bank’s CFO for four years.

The company has continuously tapped its venture arm in the years since its creation, “leveraging venture capital relationships to really sort of have a view and have access to the innovation economy,” Wasserman said.

Presently, Huntington aims to grow its business by focusing on three major strategic areas: capital markets, payments and wealth management, he said. The company plans to cultivate new business ventures in all three, Wasserman said.

The fund early last month invested in healthcare fintech Veuu, for example, with the aim of helping to develop artificial intelligence-driven tools that can ease revenue cycle challenges in the healthcare industry.

The bank also recently hired Silicon Valley Bank veteran Igor Cerc to lead Huntington Ventures, effective early September, Cerc posted on his LinkedIn profile.

As an early-stage company just achieving revenue, it is the ideal time for Huntington to invest in Veuu, Wasserman said, noting that the bank will own a significant share of the company but declining to share the amount of its investment.

“We’re still very focused on leveraging the corporate ventures function to be an accelerator for the existing strategies,” he said.

Bracing for higher-for-longer interest rates

The bank is leaning further into ventures as it looks to further drive forward growth and capital expansion through the end of 2023 and into next year.

Despite lingering headwinds, Huntington’s robust liquidity framework and strong core deposit growth are among the factors enabling the bank to operate in the current environment “through a position of substantial strength,” Timothy Sedabres, head of investor relations for Huntington, said Friday during the company’s Q3 earnings call.

“Interest rates continue on a path towards the higher-for-longer scenario which we’ve been anticipating for some time,” Sedabres said during the call. “As rates remain higher, the potential for economic activity to be negatively impacted has increased. However, thus far in the cycle, overall, our customers are effectively managing through it.”

For the quarter ended Sept. 30, Huntington reported cash and cash equivalents and available contingent borrowing capacity of $91 billion, a figure representing 204% of uninsured deposits, according to its earnings results. Total deposits, meanwhile, rose by 0.6% to reach $148.9 billion.

Despite the bank’s strong position, Wasserman — like many CFOs — is still keeping a close eye on the bank’s expenses. “Driving efficiency in our core expenses is a key priority for us,” he said Friday in response to analyst questions.

One area where Wasserman is also considering closely as a CFO is how to expand fee-based revenues with relatively little balance sheet exposure and capital requirements, particularly those that deepen customer relationships, he told CFO Dive in an interview prior to the company’s earnings call. Such relationships are “incredibly strategically important,” he said, especially given the current banking environment.  So-called “junk fees,” or unnecessary or excessive fees levied against consumers, are facing scrutiny by regulators and agencies including the Consumer Financial Protection Bureau, Industry Dive sister publication Banking Dive recently reported.

In a world where banks will hold more capital and be much more sensitive regarding interest rate risks, “a way to offset that is by growing the fee based revenues even faster,” he said. “And couple that financial optimization topic with the strategic one, which is capital, will be even more precious going forward.”

“That’s why I think that the kind of ideas and businesses that come out of ventures are critical,” he said — they solve for key financial elements as well as help the bank “double down” when it comes to providing the services requested by bank customers.