On Mar 12, 2015, we issued an updated research report on First Horizon National Corporation FHN. Shares of this Tennessee-based bank gained over 23% in a year’s time. We believe this growth story comes on the back of the company’s continued focus on expense management and maintenance of a strong capital position.
First Horizon has been undertaking cost control efforts to achieve operational efficiency and drive profitability. Notably in 2013, the company recorded a 16% year-over-year decline in non-interest expenses which further fell 27% year over year in 2014. The company affirmed it plans to cut back additional $20–$50 million in annual expenses going forward and it seeks to cut costs by focusing on reduction of non-strategic expenses in the coming quarters.
Further, driven by a strong capital position, the company has been able to pursue its acquisition strategy and enhance shareholders value through dividend hike.
Notably, in Oct 2014 the company acquired 13 branches in Tennessee. Also, during the same month the company inked a deal to acquire TrustAtlantic Financial Corp, in an effort to enhance its footprint in North Carolina.
Further, in Jan 2015, First Horizon declared a 20% increase in its quarterly cash dividend to 6 cents per share. This continues to boost investors’ confidence in the stock.
Despite the positives, we remain cautious owing to several issues faced by First Horizon that pose a threat to the company’s financials. These include a shrinking revenue base with decline in interest income and fee income, lingering mortgage repurchase issues and the prevailing stringent regulatory landscape.
Over the past 60 days Zacks Consensus Estimate for 2015 advanced 1.3% to 80 cents per share while it remained stable at 99 cents for 2016.
First Horizon currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the southeast banking space include Customers Bancorp, Inc. CUBI, Pinnacle Financial Partners Inc. PNFP and Southern First Bancshares, Inc. SFST. All these stocks sport a Zacks Rank #1 (Strong Buy).
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