First Horizon(FHN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings per share of $0.52 for Q4 2025, with a net interest margin of 3.51% and 2% loan growth [8][9] - Pre-provision net revenue and return on tangible common equity reached 15% in the second half of 2025, with net interest income growth of approximately $2 million [5][6] - The average interest-bearing cost of deposits decreased by 25 basis points, contributing to improved profitability [8][9] Business Line Data and Key Metrics Changes - Loans to mortgage companies increased by $776 million quarter-over-quarter, driven by a pickup in the refinance market [9][10] - The commercial and industrial (C&I) portfolio saw a $727 million increase in period-end balances, indicating strong origination volume [10] - Fee income increased by $3 million from the prior quarter, primarily due to elevated activity in equipment finance lease businesses [10] Market Data and Key Metrics Changes - Period-end balances for deposits increased by $2 billion compared to the prior quarter, with the average rate paid on interest-bearing deposits decreasing to 2.53% [9][10] - The company maintained a cumulative deposit beta of 64% since rates began to fall in September 2024 [9] Company Strategy and Development Direction - The company aims to continue returning capital to shareholders while investing in growth opportunities, with a focus on improving profitability and earnings growth in 2026 [7][16] - Strategic priorities include serving clients well, growing profitable relationships, and delivering on financial objectives, with an emphasis on deepening client relationships and enhancing product offerings [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to improve profitability and grow earnings in 2026, citing positive signs in current pipelines, especially in commercial lending [16][17] - The company expects year-over-year PPNR growth with mid-single-digit balance sheet growth and positive operating leverage [12][13] Other Important Information - The company ended the quarter with a CET1 ratio of 10.64%, with plans for a new repurchase program of $1.2 billion [12][13] - Management highlighted the importance of expense discipline and efficiency while continuing to invest in technology and personnel [17][18] Q&A Session Summary Question: Revenue outlook and key drivers - Management indicated that the revenue outlook of 3%-7% growth is based on the current forward curve, with loan growth being a significant factor [21][22] Question: Expense growth normalization - Management expects expenses to align with inflation, estimating a growth rate of 2.5%-3% in the absence of heavy tech investments [23][24] Question: Loan growth expectations - Management anticipates mid-single-digit loan growth, with strong momentum in C&I and mortgage warehouse lending [29][31] Question: Net interest income trajectory - Management expects net interest income growth to be in the low single digits, influenced by deposit betas and loan growth [42][44] Question: M&A considerations - Management is open to small acquisitions to enhance the branch franchise but prioritizes organic growth and profitability [50][51] Question: Credit quality and reserves - Management is confident in current reserve levels and expects net charge-offs to remain stable, reflecting strong credit performance [57][61]