First Horizon National ((FHN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In the latest earnings call, First Horizon National expressed a sentiment of cautious optimism, highlighting strong earnings per share (EPS) and margin growth, effective capital returns to shareholders, and a successful securities portfolio restructuring. The company acknowledged ongoing challenges in fee income and non-performing loans but conveyed confidence in its strategic positioning for 2025.
EPS and Margin Growth
First Horizon National reported an increase in EPS by $0.12 or 8% from the previous year, driven by a robust net interest margin of 3.35% despite a backdrop of declining interest rates. This growth underscores the company’s effective management of interest-bearing assets and liabilities.
Capital Return to Shareholders
The company demonstrated its commitment to returning capital to shareholders by distributing over $930 million through dividends and share repurchases. This move not only rewards shareholders but also reflects strong confidence in future cash flows.
Strong Credit Performance
The firm recorded a net charge-off ratio of 18 basis points for the year, marking a 10 basis point improvement from the previous year. This indicates strong credit management and lower levels of loan defaults.
Successful Securities Portfolio Restructuring
First Horizon successfully restructured $1.2 billion in securities, boosting yields from 1.9% to 5.1%. This strategic move is expected to contribute approximately $35 million annually to net interest income, enhancing profitability.
Loan and Deposit Growth
The company experienced growth in average loans by over 3% and deposits by more than 2%, showcasing its robust capability to attract and retain clientele in a competitive financial landscape.
Notable Items Impacting Results
The fourth quarter results were notably impacted by pretax items that reduced earnings by $0.13 per share, primarily due to a $91 million pretax loss from securities restructuring. Despite these challenges, the company remains focused on strategic growth.
Non-Performing Loans Increase
Non-performing loans saw a slight increase of 4 basis points from the previous quarter, attributed to higher interest rates and delayed multifamily lease-ups, indicating areas for careful management.
Fee Income Decline
Fee income, excluding deferred compensation, saw a $5 million decline from the previous quarter, highlighting the ongoing challenge of maintaining diversified revenue streams.
Challenges in Commercial Real Estate
Commercial real estate balances saw a modest decline due to client refinancing activities in the permanent market, pointing to potential market pressures.
Forward-Looking Guidance
Looking ahead, First Horizon provided guidance for 2025, projecting revenue growth between flat to 4% by leveraging countercyclical businesses. The bank aims for an adjusted EPS growth of 8% for 2024 with a maintained net interest margin of 3.35%. They plan to increase expenses by 2% to 4% in line with technology investments and efficiencies. The bank targets a long-term return on tangible common equity of 15%, maintaining a strong CET1 ratio between 10.5% and 11%.
In summary, First Horizon National’s earnings call conveyed a cautiously optimistic sentiment, with key takeaways including strong EPS and margin growth, significant capital returns, and strategic securities restructuring. While challenges remain in fee income and non-performing loans, the company is strategically positioned for continued growth and stability in 2025.