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First Horizon (FHN) Focused on Growth, Margin Stress Lingers

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On Nov 8, 2016, we issued an updated research report on First Horizon National Corporation (FHN - Free Report) . The Memphis, TN-based company’s latest quarterly results depicted continued loan growth momentum, improving efficiency and a strong capital position.

As of Sep 30, 2016, period-end loans net of unearned income came in at $19.6 billion, up 17% year over year, driven by strength in its mortgage warehouse. The quarter also benefited from the company’s acquisition of the restaurant franchise loans from GE Capital in Sep 2016. Notably, management sees strong pipelines and opportunities across the company’s core banking markets as well as specialized businesses.   

Further, First Horizon remains focused on expense management as non-interest expense declined 15.2% year over year to $687.3 million during the first nine months of 2016. Also, management reiterated its long-term target of achieving efficiency ratio in the range of 60–65%.

Additionally, driven by a strong capital position, the company has been able to pursue its acquisition strategy. Upon closure of its latest deal to acquire Coastal Securities, First Horizon anticipates to witness accretion in its earnings per share, return on tangible common equity and return on assets.

Shares of the company have gained more than 13% over the past six months.


However, the persistent low-rate environment and regulatory issues remain near-term concerns. The slow rise in interest rates provides little opportunity for expansion in net interest rate margin (NIM). The Dec 2015 rate hike had moderately expanded the company’s NIM during the first nine months of 2016. Notably, management expects slight negative impact on margin in the absence of a rate hike in December this year.

Also, the prevailing stringent regulatory landscape not only limits business growth opportunities for First Horizon, but also tends to increase compliance costs.  

Over the past 30 days, the Zacks Consensus Estimate has moved north 1% at 96 cents for 2016, while it edged down 1% at $1.05 per share for 2017.

First Horizon currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Farmers Capital Bank Corporation (FFKT - Free Report) : The Zacks Consensus Estimate for 2016 moved up 8.3% to $2.35 per share for 2016 and 7.2% to $2.08 for 2017, over the last 30 days.  The company sports a Zacks Rank#1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hancock Holding Company (HBHC - Free Report) : Over the last 30 days, the Zacks Consensus Estimate for the current year increased 3.8% to $1.9 per share and inched up 1.3% to $2.35 for 2017. The company carries a Zacks Rank #2 (Buy)

FCB Financial Holdings, Inc. (FCB - Free Report) : This Zacks Rank#2 stock witnessed a 2.2% increase in the Zacks Consensus Estimate to $2.28 per share for 2016. Also, it moved up slightly to $1.49 per share for 2017.

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