In fact, the company expects the net charge-off ratio to be between 15 basis points (bps) and 25 bps for 2023, up from 11 bps reported in 2022.įrom thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. The company’s credit quality is likely to remain under pressure in the near term, given the rising loan balance and deteriorating macroeconomic outlook. Both provisions for credit losses and net charge-offs increased in the first half of 2023. High mortgage rates have been hurting SNV’s mortgage origination volumes and refinancing activities.Īlso, First Horizon’s asset quality has been deteriorating. While the company’s mortgage income increased in 20, supported by low mortgage rates, the same witnessed a decline in 2021, 2022 and the first half of 2023. Likewise, Columbus, GA-based Synovus Financial SNV faces weakness in mortgage banking business. This is expected to reduce First Horizon’s mortgage banking income and affect fee income growth. As mortgage rates are expected to remain high in the near future, origination volumes and refinancing activities are less likely to witness any significant growth. The company’s mortgage banking income plunged in the first six months of 2023, mainly on higher mortgage rates that led to a fall in demand for loans and refinancing. Weakness in First Horizon’s mortgage banking business is a concern. Management expects adjusted expenses to rise 6-8% this year on increased investment in technology, marketing and personnel. The company has delivered around $200 million in annualized merger integration cost savings. Non-interest expenses witnessed a four-year (2018-2022) CAGR of 12.5%, with an uptrend persisting in the first half of 2023. However, elevated expenses are a major concern for First Horizon. In May 2023, the company acquired First Bancshares of Texas, while in October 2022, the company signed a deal to acquire Lone Star State Bancshares. Since 1998, PB has completed more than 30 deals. Over the years, the company has significantly expanded its operations through the buyout of community banks and branches of other banks. Similarly, for Houston, TX-based Prosperity Bancshares PB, acquisitions remain a major contributor to its top-line growth. Through these efforts, the company achieved annualized net cost savings of $200 million by 2022-end. Given its expanded footprint due to the IBERIABANK merger and the reduced need for physical centers amid the pandemic, FHN optimized its banking center network. In 2020, the company merged with IBERIABANK. This, along with an asset-sensitive balance sheet (significant exposure to floating rate loans), will likely support NII growth.įirst Horizon has remained an active acquirer through which it diversified its product offerings and expanded its footprint in the Carolina and Florida markets. A footprint in higher-growth markets offers scope for gathering lower-cost core deposits. NII (FTE basis) witnessed a three-year CAGR of 25.4% (ended 2022), with momentum persisting in the first half of 2023. With the Federal Reserve expected to keep interest rates high in the near term, growth in First Horizon’s NII is likely to remain decent as rising funding costs will put some pressure. With a strong business mix of regional and specialty banking franchises across an attractive high-growth footprint, the company is well-poised to witness loan and deposit growth. While loan balance improved in the first half of 2023, deposits declined due to lower non-interest-bearing deposit balance. Further, deposits witnessed a CAGR of 25.1% in the same time period. The company’s loans and leases recorded a CAGR of 22.7% in the last three years (2019-2022). Elevated expenses, subdued mortgage banking and worsening asset quality are major near-term headwinds.įirst Horizon has been witnessing continued loan growth. First Horizon FHN continues to benefit from rising loan balances, improving net interest income (NII) and inorganic growth strategies.
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