Our Neutral recommendation on
First Horizon National Corp.
) is reaffirmed following a review of the company fundamentals, the
current unsettled economic environment, a low interest rate
atmosphere and regulatory changes.
First Horizon's third-quarter 2011 earnings of 12 cents per
share came below the Zacks Consensus Estimate of 16 cents,
reflecting an increase in loan loss provisions.
However, results outpaced the prior quarter's earnings of 6
cents per share and the prior-year quarter earnings of 7 cents.
Results improved sequentially mainly due to an improved top line
and better cost control. However, the increase in provision for
loan losses was on the negative side.
Revenue for the quarter came in at $397.2 million, exceeding the
Zacks Consensus Estimate of $358 million. The revenue figure also
reported a 10% sequential increase, though a 7% year-over-year drop
was recorded. Provision for loan losses was $32.0 million, up
sequentially from $1.0 million, but down 36% year over year.
Concurrent to its earnings release, First Horizon also launched
a program to repurchase up to $100 million of its common stock in
the open market or in privately negotiated transactions, subject to
market conditions, by the end of August 2012.
Going forward, we believe that First Horizon's efforts to reduce
its exposure to problem loans, control costs, boost capital levels
and improve long-term profitability by focusing on growing its core
Tennessee banking franchise are encouraging. Capital deployment
initiatives are impressive.
Yet, though the wind-down of the non-strategic part of the
loan portfolio augurs well, it will remain a drag on
the company's earnings going forward. A shrinking revenue base and
regulatory issues remain our concern. Moreover, a sluggish economic
recovery coupled with a low interest rate environment and mortgage
exposure serves as headwind for the company's results.
We believe that the risk-reward profile for First Horizon is
currently balanced and hence, we have reaffirmed our Neutral
recommendation on the shares. First Horizon retains its Zacks #2
Rank, which translates into a short-term Buy rating. Among First
First Citizens Bancshares Inc.
) retains a Zacks #3 Rank implying a Hold rating.
FIRST HRZN NATL (
): Free Stock Analysis Report
To read this article on Zacks.com click here.