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First Horizon (FHN) Q1 Earnings Beat, Revenues Decline Y/Y
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First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.
Results reflect higher loan balance, provision benefits and declining expenses. However, declines in net interest income (NII) and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport.
Net income available to common shareholders was $187 million, down 17% year over year.
Revenues & Expenses Fall, Loans Climb
Total revenues were $707 million, down 12% year over year. Nonetheless, the top line outpaced the consensus estimate of $704.4 million.
NII declined 6% year over year to $479 million. Also, the net interest margin shrunk 25 basis points (bps) to 2.37%.
Non-interest income was $229 million, declining 23% from the year-ago level.
Non-interest expenses declined 9% year over year to $493 million.
The efficiency ratio was 69.66%, up from the year-ago period’s 67.53%. A rise in the efficiency ratio indicates a decrease in profitability.
Total period-end loans and leases, net of unearned income, were $55.01 billion, up marginally from the prior quarter’s end. Total period-end deposits of $74.11 billion decreased 1% from the prior quarter.
Credit Quality Deteriorates
Non-performing loans and leases of $332 million declined 16% from the prior-year period. Further, as a percentage of period-end loans on an annualized basis, the allowance for loan losses was 1.33%, down from 1.56% in the previous-year quarter.
The provision for credit losses was a benefit of $40 million compared with a benefit of $45 million in the prior-year quarter. The first quarter witnessed net charge-offs of $10 million, increasing from the prior-year quarter’s $8 million. Also, the allowance for loan and lease losses of $622 million increased 32% from the year-ago period.
Capital Position Mixed
Tier 1 leverage ratio was 8.8%, up from 8.2% in the prior year. As of Mar 31, 2022, the Common Equity Tier 1 ratio was 10%, flat from the year-earlier quarter.
However, the total capital ratio was 13.2%, down from the previous-year quarter’s 12.8%.
Our Viewpoint
First Horizon benefits from an attractive geographic footprint and rising loans balances. The company’s inorganic expansion efforts and moves to strengthen the core-banking franchise will also support financials. It has fully integrated systems related to the IBERIABANK Corporation merger in February 2022 and aims to achieve $200 million of annualized net cost savings by fourth-quarter 2022. It achieved $116 million of annualized net cost savings in the first quarter of 2022.
First Horizon Corporation Price, Consensus and EPS Surprise
The PNC Financial Services Group, Inc. (PNC - Free Report) pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. However, the bottom line decreased 20% year over year.
Higher NII, driven by interest-earning assets and loan growth, was a tailwind for PNC Financial. However, higher expenses and a decline in deposits dragged the results.
U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.
U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.
Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.
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First Horizon (FHN) Q1 Earnings Beat, Revenues Decline Y/Y
First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.
Results reflect higher loan balance, provision benefits and declining expenses. However, declines in net interest income (NII) and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport.
Net income available to common shareholders was $187 million, down 17% year over year.
Revenues & Expenses Fall, Loans Climb
Total revenues were $707 million, down 12% year over year. Nonetheless, the top line outpaced the consensus estimate of $704.4 million.
NII declined 6% year over year to $479 million. Also, the net interest margin shrunk 25 basis points (bps) to 2.37%.
Non-interest income was $229 million, declining 23% from the year-ago level.
Non-interest expenses declined 9% year over year to $493 million.
The efficiency ratio was 69.66%, up from the year-ago period’s 67.53%. A rise in the efficiency ratio indicates a decrease in profitability.
Total period-end loans and leases, net of unearned income, were $55.01 billion, up marginally from the prior quarter’s end. Total period-end deposits of $74.11 billion decreased 1% from the prior quarter.
Credit Quality Deteriorates
Non-performing loans and leases of $332 million declined 16% from the prior-year period. Further, as a percentage of period-end loans on an annualized basis, the allowance for loan losses was 1.33%, down from 1.56% in the previous-year quarter.
The provision for credit losses was a benefit of $40 million compared with a benefit of $45 million in the prior-year quarter. The first quarter witnessed net charge-offs of $10 million, increasing from the prior-year quarter’s $8 million. Also, the allowance for loan and lease losses of $622 million increased 32% from the year-ago period.
Capital Position Mixed
Tier 1 leverage ratio was 8.8%, up from 8.2% in the prior year. As of Mar 31, 2022, the Common Equity Tier 1 ratio was 10%, flat from the year-earlier quarter.
However, the total capital ratio was 13.2%, down from the previous-year quarter’s 12.8%.
Our Viewpoint
First Horizon benefits from an attractive geographic footprint and rising loans balances. The company’s inorganic expansion efforts and moves to strengthen the core-banking franchise will also support financials. It has fully integrated systems related to the IBERIABANK Corporation merger in February 2022 and aims to achieve $200 million of annualized net cost savings by fourth-quarter 2022. It achieved $116 million of annualized net cost savings in the first quarter of 2022.
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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
The PNC Financial Services Group, Inc. (PNC - Free Report) pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. However, the bottom line decreased 20% year over year.
Higher NII, driven by interest-earning assets and loan growth, was a tailwind for PNC Financial. However, higher expenses and a decline in deposits dragged the results.
U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.
U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.
Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.