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First Horizon(FHN) - 2025 Q1 - Earnings Call Transcript
FHNFirst Horizon(FHN)2025-04-17 01:09
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Financial Data and Key Metrics Changes - The company reported an adjusted EPS of 0.42pershare,adecreaseof0.42 per share, a decrease of 0.01 from the prior quarter [12] - Pre-provision net revenue grew by 16millionfromthefourthquarter,withanetinterestmarginexpansionof9basispoints[13]−Totalexpensesdecreasedby16 million from the fourth quarter, with a net interest margin expansion of 9 basis points [13] - Total expenses decreased by 20 million, excluding deferred compensation [13][28] - The CET1 ratio ended the quarter at 10.9%, reflecting the impact of 360millioninsharerepurchases[18][32]BusinessLineDataandKeyMetricsChanges−Netinterestincomeincreasedby360 million in share repurchases [18][32] Business Line Data and Key Metrics Changes - Net interest income increased by 1 million, driven by a 38 basis point reduction in interest-bearing deposit costs [17] - Fee income, excluding deferred compensation, declined by 5million[17]−Period−endloansdecreasedby15 million [17] - Period-end loans decreased by 1% from the prior quarter, with a notable decline in commercial real estate [23] - The average rate paid on interest-bearing deposits decreased to 2.72%, down from 3.10% in the previous quarter [22] Market Data and Key Metrics Changes - The company experienced a decline in period-end balances primarily due to the payoff of 559 million in brokered CDs [20] - The interest-bearing spot rate ended March at 2.70%, down 10 basis points from the end of December [22] - The company retained 95% of the 16billionindepositsandCDsthatrepricedinthefirstquarter[21]CompanyStrategyandDevelopmentDirection−Thecompanyaimstomaintainadisciplinedapproachfocusingonsafety,soundness,profitability,andgrowth[10][11]−Thestrategicdeploymentofexcesscapitalthroughsharerepurchaseprogramsisapriority,withorganicloangrowthbeingthetopchoiceforcapitalutilization[33]−Thecompanyremainscommittedtoachievinga1516 billion in deposits and CDs that repriced in the first quarter [21] Company Strategy and Development Direction - The company aims to maintain a disciplined approach focusing on safety, soundness, profitability, and growth [10][11] - The strategic deployment of excess capital through share repurchase programs is a priority, with organic loan growth being the top choice for capital utilization [33] - The company remains committed to achieving a 15% plus return on tangible common equity over the next few years [39][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about avoiding a recession despite heightened macroeconomic uncertainty [10] - The company anticipates that the economic environment will stabilize, allowing for continued growth and engagement with clients [62] - Management highlighted the importance of monitoring the portfolio closely to identify emerging credit risks [31] Other Important Information - The company increased its provision expense by 30 million to account for macroeconomic uncertainty [17] - The net charge-off ratio was reported at 19 basis points, consistent with strong performance in 2024 [14][30] - The company expects year-over-year expense increases between 2% and 4%, influenced by fixed income and mortgage production [36] Q&A Session Summary Question: Outlook on PPNR growth given uncertainty and volatility - Management remains confident in guidance, with a base case of three rate cuts anticipated [49][50] Question: Appetite for continued share buybacks - The company intends to maintain an 11% CET1 target but may adjust it based on economic conditions [56][58] Question: Insights on C&I loan balances and borrower sentiment - Borrowers are exhibiting a wait-and-see approach due to uncertainty, but optimism remains [61][66] Question: Reserve increase rationale - Reserves were increased due to macroeconomic uncertainty, with a focus on being adequately reserved [69] Question: Timeline for achieving 15% ROTCE - Management believes achieving 15% ROTCE is appropriate for a midsized regional bank and is focused on driving profitability [74][75] Question: Mortgage warehouse business outlook - The company is optimistic about the mortgage warehouse business, anticipating growth if rates decline [80][81] Question: Discussion on hedging strategies for margin protection - The company is actively monitoring interest rate sensitivity and considering hedging strategies [89] Question: Updates on fixed income business and ADRs - The fixed income business is experiencing volatility, impacting customer activity and ADRs [125] Question: Future expenses and project pipeline - The company does not expect a significant spike in expenses in the near term, focusing on long-term investments [130][131]