First Horizon Surprises With 4Q Profit As Credit Loss Provisions Drop 89%

First Horizon Corp. reported better-than-expected 4Q results. Shares of the bank holding company rose 1% in Monday’s pre-market session.

First Horizon’s (FHN) 4Q earnings of $0.46 per share declined 2.1% year-over-year but came in higher than the Street’s estimates of $0.33 per share. Revenues (comprised of net interest income and noninterest income) rose 63.6% year-over-year to $810 million and topped analysts’ expectations of $783.3 million.

The bank’s net interest margin declined 55 basis points from the year-ago period to 2.71%, while provision for credit losses declined 89% year-over-year to $1 million.

The bank’s average loans soared 95% to $59.8 million in the reported quarter. Average deposits spiked 112% and stood at $69.6 million as of the end of the fourth quarter. (See FHN stock analysis on TipRanks)

Following the results, Raymond James analyst Michael Rose maintained a Buy rating on the stock. Rose noted that lower provisions and stronger revenues drove 4Q EPS beat.

“Looking ahead, its initial 2021 outlook calls for: (1) low to mid single-digit decline in net interest income; (2) low-teens decline in fee income; (3) low to mid single digit decline in noninterest expenses; (4) an NCO [net charge-off] ratio of 0.25 – 0.35%; and (5) a CET1 [Common Equity Tier 1] ratio of 9.5% with the optionality to repurchase shares,” the analyst commented.

Overall, consensus among analysts is a Moderate Buy based on 4 Buys and 2 Holds. The average analyst price target of $15.40 implies upside potential of about 5.8% to current levels. Shares have declined 9.8% over the past year.

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Amit Singh
Amit Singh has over eight years of strong experience (both sell-side and buy-side) in analyzing financial reports and filings as well as identifying strategic investment opportunities. Over the years, Amit has covered various industries and geographies, with a primary focus on consumer staples and the consumer discretionary sector. Amit’s background spans evaluating company portfolios, building complex financial models, writing financial articles, and identifying the overall financial worth of companies. He has a post-graduate diploma in finance.