First Horizon (FHN) Q4 Earnings Beat Estimates as NII Rises
First Horizon National Corporation’s FHN fourth-quarter 2022 adjusted earnings per share of 51 cents beat the Zacks Consensus Estimate by a penny. The figure also improved 6.3% year over year.
Results benefited from higher net interest income, a fall in expenses and an improving loan balance. However, a decline in deposits, higher provisions and lower non-interest income were the undermining factors.
After considering the impact of certain notable items, net income available to common shareholders was $258 million or 45 cents per share, up from $219 million or 40 cents per share, in the prior-year quarter.
For 2022, adjusted earnings per share of $1.68 were down from the prior year’s $2.07 but surpassed the Zacks Consensus Estimate of $1.63. Net income available to common shareholders (GAAP basis) was $868 million or $1.53 per share compared with $962 million or $1.74 per share, in 2021.
Revenues & Expenses Fall, Deposits Climb
Total revenues were $882 million, up 18.4% year over year. However, the top line missed the Zacks Consensus Estimate of $903.2 million.
In 2022, total revenues were up 4.5% from the prior-year level to $3.21 billion. Also, the reported figure surpassed the Zacks Consensus Estimate of $3.19 billion.
NII increased 42.4% year over year to $709 million. Also, the net interest margin expanded 147 basis points (bps) to 3.89%.
Non-interest income was $174 million, declining 29.6% from the year-ago level.
Non-interest expenses decreased 4.7% year over year to $503 million. The company achieved $200 million of targeted annualized net cost savings from the IBERIABANK merger.
The efficiency ratio was 57.07%, down from the year-ago period’s 70.88%. A fall in the efficiency ratio indicates an increase in profitability.
Total period-end loans and leases, net of unearned income, were $58.1 billion, up 1.3% from the prior quarter’s end. Total period-end deposits of $63.5 billion decreased 3.8%.
Credit Quality Worsens
Non-performing loans and leases of $316 million increased 14.9% from the prior-year period's level. The fourth quarter witnessed net charge-offs of $26 million, an increase from the prior-year quarter’s $1 million. Moreover, the provision for credit losses of $45 million against a benefit of $65 million in the prior-year quarter.
The allowance for loan and lease losses of $685 million increased 2.2% from the year-ago period.
Further, as a percentage of period-end loans on an annualized basis, the allowance for loan losses was 1.18%, down 4 bps from the previous-year quarter.
Capital Ratios Improves
As of Dec 31, 2022, the Common Equity Tier 1 ratio was 10.2%, up from 9.9% at the end of the year-ago quarter.
The total capital ratio was 13.3%, up from the previous-year quarter’s 12.3%. Tier 1 leverage ratio was 10.4%, up from 8.1% in the prior year.
First Horizon benefits from an attractive geographic footprint and rising deposit balances. The company’s inorganic expansion efforts will also support its financials. FHN is being acquired by The Toronto-Dominion Bank (TD) for $13.4 billion. Now, TD anticipates the deal to close by April 2023, subject to regulatory approvals.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
State Street’s STT is scheduled to release fourth-quarter and full-year 2022 numbers on Jan 20.
Over the past 30 days, the Zacks Consensus Estimate for State Street’s quarterly earnings has moved 7.5% north to $2.00. This is at par with the prior-year quarter’s number.
F.N.B. Corporation’s FNB is scheduled to release fourth-quarter and full-year 2022 numbers on Jan 23.
Over the past 30 days, the Zacks Consensus Estimate for FNB’s quarterly earnings has remained unchanged. This shows an increase of 36.7% from the prior-year quarter.
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