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First Horizon (FHN) Q3 Earnings Miss Estimates, Revenues Beat
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First Horizon National Corporation (FHN - Free Report) reported third-quarter 2022 adjusted earnings per share of 44 cents. The reported number missed the Zacks Consensus Estimate of 45 cents. Also, the figure declined 12% year over year.
The results reflect strong net interest income (NII) growth, high loan and lease balances, and a decline in expenses. However, a fall in non-interest income, lower deposits and higher provisions were headwinds.
Net income available to common shareholders was $257 million, up 15% year over year.
Revenues Rise, Expenses & Deposits Fall
Total revenues were $875 million, up 19% year over year. Also, the top line surpassed the consensus estimate of $812.5 million.
NII increased 35% year over year to $662 million. Also, the net interest margin (NIM) rose 108 basis points to 3.49%.
Non-interest income was $213 million, plunging 14% year over year.
Non-interest expenses fell 11% year over year to $468 million.
The efficiency ratio was 53.56%, down from the year-ago period’s 71.21%. A fall in the efficiency ratio indicates an increase in profitability.
Total period-end loans and leases, net of unearned income, were $57.35 billion, up 1.4% from the prior quarter’s end. Total period-end deposits of $66.01 billion decreased 6.4%.
Credit Quality: Mixed Bag
Non-performing loans and leases of $292 million declined 16% from the prior-year period. The allowance for loan and lease losses of $664 million decreased 9%. As of Sep 30, 2022, the ratio of total allowance for loans and lease losses to loans and leases was 1.16%, down from 1.32% in the prior-year quarter.
However, the provision for credit losses was $60 million against a benefit of $85 million in the prior-year quarter. The third quarter witnessed net charge-offs of $12 million, higher than $3 million in the prior-year quarter.
Capital Ratios Deteriorate
As of Sep 30, 2022, the Common Equity Tier 1 ratio was 9.9%, down from 10.1% in the year-earlier quarter. The total capital ratio was 13.1%, down from the prior-year quarter’s 12.6%.
Nonetheless, the Tier 1 leverage ratio was 9.8%, up from 8.1% in the prior year.
Our Viewpoint
First Horizon has a diversified product base. It has expanded its footprint in the targeted markets. The company’s continuous focus on inorganic expansion renders an optimistic approach to investors.
By fourth-quarter 2022, First Horizon aims to deliver $200 million of targeted annualized net cost saves from the IBERIABANK merger. FHN has achieved $184 million of annualized net cost saves in the third quarter.
First Horizon Corporation Price, Consensus and EPS Surprise
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
TFC’S results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates increased NII, which was a major positive for Truist Financial.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.
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First Horizon (FHN) Q3 Earnings Miss Estimates, Revenues Beat
First Horizon National Corporation (FHN - Free Report) reported third-quarter 2022 adjusted earnings per share of 44 cents. The reported number missed the Zacks Consensus Estimate of 45 cents. Also, the figure declined 12% year over year.
The results reflect strong net interest income (NII) growth, high loan and lease balances, and a decline in expenses. However, a fall in non-interest income, lower deposits and higher provisions were headwinds.
Net income available to common shareholders was $257 million, up 15% year over year.
Revenues Rise, Expenses & Deposits Fall
Total revenues were $875 million, up 19% year over year. Also, the top line surpassed the consensus estimate of $812.5 million.
NII increased 35% year over year to $662 million. Also, the net interest margin (NIM) rose 108 basis points to 3.49%.
Non-interest income was $213 million, plunging 14% year over year.
Non-interest expenses fell 11% year over year to $468 million.
The efficiency ratio was 53.56%, down from the year-ago period’s 71.21%. A fall in the efficiency ratio indicates an increase in profitability.
Total period-end loans and leases, net of unearned income, were $57.35 billion, up 1.4% from the prior quarter’s end. Total period-end deposits of $66.01 billion decreased 6.4%.
Credit Quality: Mixed Bag
Non-performing loans and leases of $292 million declined 16% from the prior-year period. The allowance for loan and lease losses of $664 million decreased 9%. As of Sep 30, 2022, the ratio of total allowance for loans and lease losses to loans and leases was 1.16%, down from 1.32% in the prior-year quarter.
However, the provision for credit losses was $60 million against a benefit of $85 million in the prior-year quarter. The third quarter witnessed net charge-offs of $12 million, higher than $3 million in the prior-year quarter.
Capital Ratios Deteriorate
As of Sep 30, 2022, the Common Equity Tier 1 ratio was 9.9%, down from 10.1% in the year-earlier quarter. The total capital ratio was 13.1%, down from the prior-year quarter’s 12.6%.
Nonetheless, the Tier 1 leverage ratio was 9.8%, up from 8.1% in the prior year.
Our Viewpoint
First Horizon has a diversified product base. It has expanded its footprint in the targeted markets. The company’s continuous focus on inorganic expansion renders an optimistic approach to investors.
By fourth-quarter 2022, First Horizon aims to deliver $200 million of targeted annualized net cost saves from the IBERIABANK merger. FHN has achieved $184 million of annualized net cost saves in the third quarter.
First Horizon Corporation Price, Consensus and EPS Surprise
First Horizon Corporation price-consensus-eps-surprise-chart | First Horizon Corporation Quote
First Horizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
TFC’S results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates increased NII, which was a major positive for Truist Financial.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Results excluded $2 billion or 45 cents per share of charges related to a number of “historical matters, including litigation, customer remediation, and regulatory matters.”
Results benefited from higher NII, rising rates and solid average loan growth. Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors for WFC. Also, the rise in non-interest expenses acted as a headwind.