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First Horizon (FHN) Stock Rises as Q4 Earnings Beat Estimates
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First Horizon Corporation’s (FHN - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding notable items) of 32 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure declined 37.3% year over year.
Investors have been bullish on the stock, as the share price gained 5.1% in yesterday’s trading session on higher fee income. However, a fall in net interest income (NII) and a rise in operating expenses and provisions was a significant drag.
Net income available to common shareholders was $175 million, down 32.2% year over year.
For 2023, adjusted earnings per share of $1.43 declined from the prior year’s $1.68 but surpassed the Zacks Consensus Estimate of $1.42. Net income available to common shareholders was $865 million or $1.54 per share compared with $868 million or $1.53 per share in 2022.
Total revenues were $800 million, down 9.3% year over year. However, the top line surpassed the Zacks Consensus Estimate of $784.2 million.
In 2023, total revenues increased 8.1% from the prior-year level to $3.47 billion. Also, the reported figure surpassed the Zacks Consensus Estimate of $3.27 billion.
NII declined 13% year over year to $617 million. Also, the net interest margin (NIM) shrunk 62 basis points to 3.27%.
Non-interest income was $183 million, increasing 5.2% from the year-ago level.
Non-interest expenses rose 13.7% year over year to $572 million.
The efficiency ratio was 71.14%, up from the year-ago period’s 57.10%. A rise in the efficiency ratio indicates a fall in profitability.
Total period-end loans and leases, net of unearned income, were $61.29 billion, which declined marginally from the prior-quarter end. Total period-end deposits of $65.78 billion declined 1.8%.
Credit Quality Worsens
Non-performing loans and leases of $462 million increased 46.2% from the prior-year period. First Horizon witnessed net charge-offs of $36 million, which rose from the year-ago quarter’s $26 million.
Moreover, the provision for credit losses was $50 million compared with $45 million in the year-earlier quarter. As of Dec 31, 2023, the ratio of total allowance for loan and lease losses to loans and leases was 1.26%, up from 1.18% in the prior-year quarter.
The allowance for loan and lease losses of $773 million fell 12.8% from the year-ago period.
Capital Ratios Improve
As of Dec 31, 2023, the Common Equity Tier 1 ratio was 11.4%, up from 10.2% at the end of the year-ago quarter.
The total capital ratio was 14%, up from the prior-year quarter’s 13.3%. The tier 1 leverage ratio was 10.7%, up from 10.4% in the previous year.
Our Viewpoint
First Horizon has expanded its footprint in the targeted markets. Also, it has been consistent in improving its capital ratios over the past few quarters. However, elevated expenses are likely to limit bottom-line growth in the upcoming period. Further, any deterioration in the balance sheet may affect its financials.
First Horizon Corporation Price, Consensus and EPS Surprise
KeyCorp’s (KEY - Free Report) fourth-quarter 2023 adjusted earnings from continuing operations of 25 cents per share surpassed the Zacks Consensus Estimate of 22 cents. This excludes an FDIC special assessment charge, efficiency-related expenses and a pension settlement charge.
Results benefited from a decline in provisions. However, lower NII and non-interest income, along with higher expenses, were the undermining factors. Further, higher deposit costs and lower average loan balance weighed on NIM despite a higher interest rate environment.
M&T Bank Corporation’s (MTB - Free Report) fourth-quarter 2023 net operating earnings per share of $2.81 missed the Zacks Consensus Estimate of $3.67. Also, the bottom line compared unfavorably with the $4.57 earned in the year-ago quarter.
Results were adversely impacted by the rise in provision for credit losses, a decline in NII and higher expenses. On the other hand, a rise in loans and leases and higher rates offered some support.
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First Horizon (FHN) Stock Rises as Q4 Earnings Beat Estimates
First Horizon Corporation’s (FHN - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding notable items) of 32 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure declined 37.3% year over year.
Investors have been bullish on the stock, as the share price gained 5.1% in yesterday’s trading session on higher fee income. However, a fall in net interest income (NII) and a rise in operating expenses and provisions was a significant drag.
Net income available to common shareholders was $175 million, down 32.2% year over year.
For 2023, adjusted earnings per share of $1.43 declined from the prior year’s $1.68 but surpassed the Zacks Consensus Estimate of $1.42. Net income available to common shareholders was $865 million or $1.54 per share compared with $868 million or $1.53 per share in 2022.
Revenues Fall, Expenses Rise, Loans & Deposits Decline
Total revenues were $800 million, down 9.3% year over year. However, the top line surpassed the Zacks Consensus Estimate of $784.2 million.
In 2023, total revenues increased 8.1% from the prior-year level to $3.47 billion. Also, the reported figure surpassed the Zacks Consensus Estimate of $3.27 billion.
NII declined 13% year over year to $617 million. Also, the net interest margin (NIM) shrunk 62 basis points to 3.27%.
Non-interest income was $183 million, increasing 5.2% from the year-ago level.
Non-interest expenses rose 13.7% year over year to $572 million.
The efficiency ratio was 71.14%, up from the year-ago period’s 57.10%. A rise in the efficiency ratio indicates a fall in profitability.
Total period-end loans and leases, net of unearned income, were $61.29 billion, which declined marginally from the prior-quarter end. Total period-end deposits of $65.78 billion declined 1.8%.
Credit Quality Worsens
Non-performing loans and leases of $462 million increased 46.2% from the prior-year period. First Horizon witnessed net charge-offs of $36 million, which rose from the year-ago quarter’s $26 million.
Moreover, the provision for credit losses was $50 million compared with $45 million in the year-earlier quarter. As of Dec 31, 2023, the ratio of total allowance for loan and lease losses to loans and leases was 1.26%, up from 1.18% in the prior-year quarter.
The allowance for loan and lease losses of $773 million fell 12.8% from the year-ago period.
Capital Ratios Improve
As of Dec 31, 2023, the Common Equity Tier 1 ratio was 11.4%, up from 10.2% at the end of the year-ago quarter.
The total capital ratio was 14%, up from the prior-year quarter’s 13.3%. The tier 1 leverage ratio was 10.7%, up from 10.4% in the previous year.
Our Viewpoint
First Horizon has expanded its footprint in the targeted markets. Also, it has been consistent in improving its capital ratios over the past few quarters. However, elevated expenses are likely to limit bottom-line growth in the upcoming period. Further, any deterioration in the balance sheet may affect its financials.
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
KeyCorp’s (KEY - Free Report) fourth-quarter 2023 adjusted earnings from continuing operations of 25 cents per share surpassed the Zacks Consensus Estimate of 22 cents. This excludes an FDIC special assessment charge, efficiency-related expenses and a pension settlement charge.
Results benefited from a decline in provisions. However, lower NII and non-interest income, along with higher expenses, were the undermining factors. Further, higher deposit costs and lower average loan balance weighed on NIM despite a higher interest rate environment.
M&T Bank Corporation’s (MTB - Free Report) fourth-quarter 2023 net operating earnings per share of $2.81 missed the Zacks Consensus Estimate of $3.67. Also, the bottom line compared unfavorably with the $4.57 earned in the year-ago quarter.
Results were adversely impacted by the rise in provision for credit losses, a decline in NII and higher expenses. On the other hand, a rise in loans and leases and higher rates offered some support.