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First Horizon (FHN) Q3 Earnings Beat, Revenues Decline Y/Y
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First Horizon Corporation’s (FHN - Free Report) third-quarter 2023 adjusted earnings per share (excluding notable items) of 27 cents surpassed the Zacks Consensus Estimate of 25 cents. However, the figure declined 39% year over year.
Results were affected by lower net interest income (NII) and non-interest income. Also, higher provisions and rising expenses were undermining factors. Nonetheless, improving loan and deposit balances were tailwinds.
Net income available to common shareholders was $129 million, down 50% year over year.
Total revenues were $778 million, down 11% year over year. However, the top line missed the Zacks Consensus Estimate of $801.2 million.
NII declined 9% year over year to $605 million. Also, the net interest margin fell 21 basis points to 3.17%.
Non-interest income was $173 million, down 19% from the year-ago level.
Non-interest expenses rose 1% year over year to $474 million.
The efficiency ratio was 60.92%, down from the year-ago period’s 53.56%. A rise in the efficiency ratio indicates a fall in profitability.
Total period-end loans and leases, net of unearned income, were $61.7 billion, up 1% from the prior-quarter end. Total period-end deposits of $67 billion grew 2%.
Credit Quality Worsens
Non-performing loans and leases of $394 million increased 35% from the prior-year period. First Horizon witnessed net charge-offs of $95 million, which rose from the year-ago quarter’s $12 million.
Moreover, the provision for credit losses was $110 million compared with $60 million in the year-earlier quarter. As of Sep 30, 2023, the ratio of total allowance for loan and lease losses to loans and leases was 1.23%, up from 1.16% in the prior-year quarter.
The allowance for loan and lease losses of $760 million fell 14% from the year-ago period.
Capital Ratios Improve
As of Sep 30, 2023, the Common Equity Tier 1 ratio was 11.1%, up from 9.9% at the end of the year-ago quarter.
The total capital ratio was 13.6%, up from the prior-year quarter’s 13.1%. The tier 1 leverage ratio was 10.5%, up from 9.8% in the prior year.
Our Viewpoint
First Horizon has expanded its footprint in the targeted markets. Going forward, FHN is likely to benefit from increased loan and deposit balances. However, elevated expenses are likely to limit bottom-line growth in the upcoming period.
First Horizon Corporation Price, Consensus and EPS Surprise
Wells Fargo & Company’s (WFC - Free Report) third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.
WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.
Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, Citigroup witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, and the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.
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First Horizon (FHN) Q3 Earnings Beat, Revenues Decline Y/Y
First Horizon Corporation’s (FHN - Free Report) third-quarter 2023 adjusted earnings per share (excluding notable items) of 27 cents surpassed the Zacks Consensus Estimate of 25 cents. However, the figure declined 39% year over year.
Results were affected by lower net interest income (NII) and non-interest income. Also, higher provisions and rising expenses were undermining factors. Nonetheless, improving loan and deposit balances were tailwinds.
Net income available to common shareholders was $129 million, down 50% year over year.
Revenues Fall, Expenses Rise, Loans & Deposits Grow
Total revenues were $778 million, down 11% year over year. However, the top line missed the Zacks Consensus Estimate of $801.2 million.
NII declined 9% year over year to $605 million. Also, the net interest margin fell 21 basis points to 3.17%.
Non-interest income was $173 million, down 19% from the year-ago level.
Non-interest expenses rose 1% year over year to $474 million.
The efficiency ratio was 60.92%, down from the year-ago period’s 53.56%. A rise in the efficiency ratio indicates a fall in profitability.
Total period-end loans and leases, net of unearned income, were $61.7 billion, up 1% from the prior-quarter end. Total period-end deposits of $67 billion grew 2%.
Credit Quality Worsens
Non-performing loans and leases of $394 million increased 35% from the prior-year period. First Horizon witnessed net charge-offs of $95 million, which rose from the year-ago quarter’s $12 million.
Moreover, the provision for credit losses was $110 million compared with $60 million in the year-earlier quarter. As of Sep 30, 2023, the ratio of total allowance for loan and lease losses to loans and leases was 1.23%, up from 1.16% in the prior-year quarter.
The allowance for loan and lease losses of $760 million fell 14% from the year-ago period.
Capital Ratios Improve
As of Sep 30, 2023, the Common Equity Tier 1 ratio was 11.1%, up from 9.9% at the end of the year-ago quarter.
The total capital ratio was 13.6%, up from the prior-year quarter’s 13.1%. The tier 1 leverage ratio was 10.5%, up from 9.8% in the prior year.
Our Viewpoint
First Horizon has expanded its footprint in the targeted markets. Going forward, FHN is likely to benefit from increased loan and deposit balances. However, elevated expenses are likely to limit bottom-line growth in the upcoming period.
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
Wells Fargo & Company’s (WFC - Free Report) third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.
WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.
Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, Citigroup witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, and the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.