First Horizon(US:FHN)2024-10-16 15:48Financial Data and Key Metrics Changes - First Horizon reported an adjusted EPS of $0.42, a $0.06 increase from the prior quarter [4][6] - Pre-provision net revenue increased by $11 million, leading to an adjusted return on tangible common equity of 13.2% [4][6] - The common equity Tier 1 (CET1) ratio rose to 11.2%, slightly above the near-term target of 11% [5][6] Business Line Data and Key Metrics Changes - Net interest income (NII) remained stable at $631 million, with a net interest margin of 3.31%, down 7 basis points from the previous quarter [7][8] - Fee income, excluding deferred compensation, increased by $11 million, driven by a 22% improvement in average daily revenue from the fixed income business [11][12] - Average loans increased by 1% from the prior quarter, while period-end loans declined by 1% due to a $340 million sale in the healthcare lending vertical [10][14] Market Data and Key Metrics Changes - Deposit balances increased by 3%, with nearly $1 billion growth attributed to client acquisition [9][10] - The average rate paid on interest-bearing deposits rose to 3.44% from 3.35% [8][9] - Non-performing loans increased by $4 million, with commercial and industrial loans slightly exceeding declines in consumer and commercial real estate [14] Company Strategy and Development Direction - The company aims to enhance shareholder value while navigating economic uncertainties, focusing on client growth and retention [18][19] - First Horizon is committed to operational efficiency and has implemented staffing optimizations and outsourcing to improve service delivery [13][19] - The company is preparing for potential regulatory changes as it approaches the $100 billion asset threshold, investing in necessary infrastructure [56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to navigate economic challenges and capitalize on growth opportunities in the Southeast [5][18] - The outlook for total revenue is expected to be flat to up 2% year-over-year, influenced by Federal Reserve actions [15][16] - Management remains cautious about net charge-offs, monitoring potential losses from recent weather events [16] Other Important Information - The company repurchased $75 million in stock during the quarter, totaling over $440 million year-to-date [5] - Notable items in the quarter reduced results by $0.02 per share, including expenses related to derivative valuations and restructuring [7] Q&A Session Summary Question: Insights on NII and fixed income business - Management noted potential upside in the fixed income business if rates decline further, with strong momentum observed in August and September [20][21] Question: Loan to deposit ratio management - The company monitors both loan to deposit and loans plus securities to deposit ratios, aiming to use client deposits first [22][24] Question: Margin expectations for next year - Management indicated that margin changes will depend on the pace of rate cuts, with a push and pull expected in the coming quarters [25][26] Question: Loan growth expectations - Management expressed optimism about potential loan demand but acknowledged current market conditions are muted [31][32] Question: Mortgage outlook and rate environment - A sub-6% mortgage rate is necessary for improved performance in the mortgage sector, with expectations for new home purchases to drive growth [60][61] Question: Non-interest bearing deposits initiatives - The company is actively working to grow non-interest bearing deposits through various initiatives [46] Question: Regulatory changes and CET1 ratio - Management plans to reassess the CET1 ratio in early 2025, with no immediate changes expected [55]