On Apr 2, 2013, we reiterated our Neutral recommendation on
First Horizon National Corporation
) based on its improved credit quality metrics. However, higher
expenses were the downside.
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First Horizon's fourth-quarter earnings of 17 cents per share
were in line with the Zacks Consensus Estimate, but beat the
prior-quarter earnings by 70%. The results were driven by
considerably improved credit trends. However, the pressure on
revenue growth continued. Rising expenses was also a headwind.
Over the last 60 days, the Zacks Consensus Estimate for 2013
remained stable whereas for 2014 it declined by 1%. As a result,
First Horizon carries a Zacks Rank #3 (Hold).
First Horizon continued to witness overall improvement in their
credit quality, but with some quarter to quarter volatility.
Going forward, we believe that the asset quality will improve
with continued reserve releases. We are also impressed with the
company's cost-containment measures that have helped the company
deliver improved bottom-line performance even amid the sluggish
macro environment. Moreover, we believe that the company's solid
capital levels will offer flexibility not only on the capital
deployment but also for any strategic acquisitions in Tennessee
or in the adjacent markets that will be accretive to its business
model. Moreover, we are also encouraged by the several strategic
repositioning efforts taken by First Horizon in order to improve
However, First Horizon's mortgage repurchase issues remain an
overhang on its earnings. We are also concerned about the
company's top-line growth and margins, which continue to be
impacted by the low rate environment and sluggish economic
recovery. Further, the company's significant exposure to problem
loan categories, such as industrial and commercial mortgage,
remains another cause for concern. Also, the sluggish
macroenvironment marred by regulatory issues will limit the
company's flexibility with respect to its business investments.
Considering, the balance of positives and negatives, First
Horizon carries a Zack Rank #3 (Hold).
Other Major Banks Worth Considering
Other banks that are performing better than First Horizon and are
worth a look include
Meta Financial Group, Inc.
Flagstar Bancorp Inc.
First Defiance Financial Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).